Exhibit 13

Financial Highlights

In Thousands, Except Per Share Amounts

|For Fiscal Years                                       | 2004 |  | 2003 |        
|------------------------------------------------------ | ---- |  | ---- | -------
|                                                       |      |  |      |        
|Operating Results                                      |      |  |      |        
|Net sales                                              |      |  | $    | 628,169
|Segment earnings                                       |      |  |      | 72,624 
|Income from continuing operations                      |      |  |      | 33,374 
|Income (loss) from discontinued operations, net of tax |      |  |      | 9,181  
|Net earnings                                           |      |  |      | 42,555 
|                                                       |      |  |      |        
|Earnings (loss) per share  diluted:                   |      | 
|Continuing operations                                  |      |  |      | 1.55   
|Discontinued operations                                |      |  |      | .43    
|Earnings per share                                     |      |  |      | 1.98   
|                                                       |      |  |      |        
|Weighted average shares outstanding  diluted          |      |  |      | 21,539 
|                                                      
|                                                       |      |  |      |        
|Financial Position                                     |      | 
|Total assets                                           |      |  | $    | 932,833
|Property, plant and equipment, net                     |      |  |      | 145,135
|Long-term debt, net                                    |      |  |      | 249,056
|Shareholders' equity                                   |      |  |      | 458,513
|                                                      

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Managements
Discussion and Analysis of Financial Condition and Results of Continuing Operations

# OVERVIEW

We view and operate our businesses in
three segments: Avionics & Controls, Sensors & Systems and Advanced
Materials. The Avionics & Controls segment designs and manufactures technology
interface systems for military and commercial aircraft and land- and sea-based military
vehicles, secure communications systems, specialized medical equipment, and other
industrial applications. The Sensors & Systems segment produces high-precision
temperature and pressure sensors, fluid control components, micro-motors, motion control
sensors, and other related systems, principally for aerospace and defense customers. The
Advanced Materials segment develops and manufactures high-performance elastomer products
used in a wide range of commercial aerospace and military applications and combustible
ordnance components and electronic warfare countermeasure devices for military customers.
Sales in all segments include domestic, international, defense and commercial customers.

Our current business and strategic
plan focuses on the continued development of our products in three key technology
segments: avionics and controls, sensors and systems and specialized high-performance
elastomers and other complex materials, principally for aerospace and defense markets. We
are concentrating our efforts to expand our capabilities in these markets and to
anticipate the global needs of our customers and respond to such needs with comprehensive
solutions. These efforts focus on continuous research and new product development,
acquisitions and establishing strategic realignments of operations to expand our
capabilities as a more comprehensive supplier to our customers across our entire product
offering. In fiscal 2004, we completed two important acquisitions. We acquired all of the
outstanding capital stock of Leach Holding Corporation (Leach), a $119 million (sales)
manufacturer of electrical power switching, control and data communication devices for the
aerospace industry, for approximately $145.0 million in cash before acquisition costs
and an adjustment for the change in working capital from December 31, 2003 to closing.
In addition, we acquired all of
the outstanding capital stock of AVISTA, Incorporated (AVISTA), a $10 million (sales)
Wisconsin-based developer of embedded avionics software, for approximately
$6.5 million.

We sell our commercial aerospace
products as original equipment to aircraft manufacturers and sell replacement parts and
spares to aftermarket repair and service providers. The attacks of September 11, 2001
and the ongoing concerns of global terrorism have impacted the profitability of the
commercial aerospace industry and continue to impact our near-term outlook for original
equipment manufacturer (OEM) sales and aftermarket business from aircraft operators. We
believe, however, that improved security and safety measures over time will restore
passenger confidence. Recently, certain airline operating measures, such as available seat
miles, revenue passenger miles and active fleet have shown improvement. We believe our
commercial and regional aircraft business will benefit from increased passenger traffic in
the future. In addition, we believe the long-term demand for business jets will support a
recovery in this market.

On July 25, 2002, our Board
of Directors adopted a formal plan for the sale of the assets and operations of our
Automation segment. As a result, the consolidated financial statements present

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the Automation segment as a discontinued operation.
In fiscal 2002, we recorded an after-tax loss from discontinued operations of $25.0 million. An additional charge of
$5.8 million, net of a $3.5 million tax benefit, was recorded in fiscal 2003 for
losses in our discontinued operations. This additional charge was precipitated by
prolonged weakness in electronics, telecommunications and heavy equipment markets, which
led to higher operating losses and longer than expected holding periods for the
discontinued operations. On July 23, 2003, we sold the assets of our Excellon
Automation subsidiary. On August 31, 2004, we sold the stock of W. A. Whitney
Co. for $10.0 million in cash. Upon the final disposition of our discontinued
operations, we recorded an $8.0 million gain, net of $4.5 million in tax,
including the reversal of estimated reserves, which were recognizable upon the sale of the
business.

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# Results of Continuing
Operations

# Fiscal 2004 Compared
with Fiscal 2003

Sales for fiscal 2004 increased 11.7% over
the prior year. Sales by segment were as follows:

Dollars In Thousands

|                    | Increase (Decrease) |  |  |        | 
|------------------- | ------------------- |  |  | ------ | 
|
|                    |                     |  |  |        | 
|Avionics & Controls |                     |  |  | 5.7%   | 
|Sensors & Systems   |                     |  |  | 32.5%  | 
|Advanced Materials  |                     |  |  | 3.1%   | 
|Other               |                     |  |  | (8.7)% | 
|                   
|Total               |                     |  |  |        | 
|                   

The 5.7% increase in
Avionics & Controls principally reflected $16.8 million in incremental sales
from the Leach medical unit and AVISTA acquisitions, increased sales of technology
interface systems for land-based military vehicles, higher sales of cockpit grips and
controls, and increased sales volumes of aftermarket cockpit switches. These increases
were partially offset by lower sales volumes of specialized medical equipment and,
specifically, defense related cockpit switch sales which last year benefited from a
defense retrofit program.

The 32.5% increase in
Sensors & Systems principally reflected $63.8 million in incremental sales
from the Leach and Weston Group acquisitions, and was partially offset by a reduction in
distribution sales to the British Ministry of Defence (British MoD) and the sale of two
small product lines in the second quarter of fiscal 2003 and fourth quarter of fiscal
2004, respectively. The increase also reflected a stronger euro relative to the U.S.
dollar, as the average exchange rate from the euro to the U.S. dollar increased from 1.09
in fiscal 2003 to 1.22 in fiscal 2004.

The 3.1% increase in Advanced
Materials reflected higher sales of flare countermeasure devices and elastomer sales to
aerospace and industrial commercial customers and was partially offset by lower sales of
combustible ordnance due to reduced U.S. Army requirements. Additionally, certain
elastomer material sales declined due to lower requirements from defense customers.

Sales to foreign customers, including
export sales by domestic operations, totaled $244.6 million and $184.5 million,
and accounted for 38.9% and 32.8% of our sales for fiscal 2004 and 2003, respectively.

Overall, gross margin as a percentage
of sales was 32.1% and 31.8% for fiscal 2004 and 2003, respectively. Avionics &
Controls segment gross margin was 33.7% for both fiscal 2004 and 2003,
reflecting lower sales volumes and margins on specialized medical equipment and cockpit
switches, offset by a higher mix of aftermarket product sales, incremental gross margin
from the AVISTA acquisition and strong fourth quarter performance at our Mason Electric
(Mason) operation. In the third quarter of fiscal 2004, Mason and Janco Corporation moved
from their separate facilities to one new facility. This move required more time and
expense to execute than originally anticipated, resulting in higher than expected moving expenses, operating

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inefficiencies and delayed shipments. By the fourth quarter, the
combined operation had substantially reduced delinquent shipments and operating
inefficiencies which had resulted from the move. Sensors & Systems segment gross
margin was 36.6% and 34.0% for fiscal 2004 and 2003, respectively. The increase in
Sensors & Systems gross margin from fiscal 2003 was largely due to the Weston
Group acquisition and its higher margin product mix. Gross margin was also impacted by a
weaker U.S. dollar compared to the euro on U.S. dollar-denominated sales and euro-based
cost of sales. Advanced Materials segment gross margin was 26.1% and 28.3% for fiscal 2004
and 2003, respectively. The decrease in Advanced Materials gross margin from fiscal 2003
reflected an unfavorable sales mix of lower margin countermeasure devices and certain
operational inefficiencies from integrating acquired businesses, which resulted in higher
labor costs at our elastomer operations.

Selling, general and administrative
expenses (which include corporate expenses) increased to $117.7 million in fiscal
2004 compared with $107.8 million in the prior year. The increase in selling, general
and administrative expenses primarily reflected incremental selling, general and
administrative expenses from the Leach, Weston Group and AVISTA acquisitions partially
offset by expense reductions at Sensors & Systems and our Advanced Materials
elastomer operations. As a percentage of sales, selling, general and administrative
expenses were 18.7% and 19.2% in fiscal 2004 and 2003, respectively.

Research, development and related
engineering spending increased to $27.7 million, or 4.4% of sales, in fiscal 2004
compared with $19.5 million, or 3.5% of sales, in the prior year. This is consistent
with our philosophy of continually investing in new products and capabilities regardless
of the business cycle. Additionally, the increase in research, development and related
engineering expense reflects the requirement to fund development for new programs for our
OEM customers.

Segment earnings (which exclude
corporate expenses) increased 6.5% during fiscal 2004 to $72.6 million compared to
$68.2 million in the prior year. Avionics & Controls segment earnings
increased 11% during fiscal 2004 to $33.1 million. This increase in
Avionics & Controls reflected incremental earnings from the AVISTA acquisition,
higher sales of controls and grips, and technology interface systems for land-based
military vehicles. Avionics & Controls earnings were impacted by the shipment of
acquired inventories of the Leach medical unit, which were valued at fair market value at
acquisition in accordance with generally accepted accounting principles.
Sensors & Systems segment earnings increased 5.3% to $10.6 million. This
increase in Sensors & Systems was primarily due to incremental earnings from the
Weston Group acquisition and the impact of the shipment in fiscal 2003 of acquired
inventories of the Weston Group, which were valued at fair market value at acquisition.
Sensors & Systems earnings also reflected $4.5 million in severance and
early retirement expense, including legal expenses covering 55 employees in engineering,
production, quality, research and development and administration functions.
Sensors & Systems earnings reflected a decline in temperature and pressure
sensors sales and sales to the British MoD for which we act as a distributor, as well as
higher selling and engineering development expenses for motion control products.
Furthermore, Sensors & Systems earnings were impacted by the shipment of acquired
inventories of the Leach acquisition, which were valued at fair market value at
acquisition, as well as the effect of a weaker U.S. dollar relative to the euro on U.S.
dollar-denominated sales and euro-based

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operating expenses. Advanced Materials segment earnings increased 1.3% to $29.5 million. This 1.3% increase in Advanced Materials
reflected mixed results. Combustible ordnance and countermeasure operations were impacted
by lower sales volumes of higher margin combustible ordnance and increased maintenance
expenses at our flare countermeasure operation. Additionally, our elastomer material
operations were impacted by acquisition integration expenses, production inefficiencies
and higher workers compensation expenses, while earnings from our specialized metal
finishing unit were favorably impacted by the elimination of redundant facilities,
improved cost control and increased sales prices.

During the fourth quarter of fiscal
2004, we sold a product line in our Sensors & Systems segment and recorded a gain
of $3.4 million. During the third quarter of fiscal 2003, we recorded a foreign
currency gain of approximately $2.7 million upon the settlement of foreign currency
forward contracts related to the completion of the Weston acquisition. These gains are
reflected in Other Expense, Net.

Interest income increased to
$2.0 million during fiscal 2004 compared with $0.9 million in the prior year,
reflecting interest earned on a U.S. income tax refund. Interest expense increased to
$17.3 million during fiscal 2004 compared with $12.0 million in the prior year,
due to the full year effect of the issuance of $175.0 million in 7.75% Senior
Subordinated Notes due June 15, 2013. In September 2003, we entered into an
interest rate swap agreement on $75.0 million of our Senior Subordinated Notes due in
2013. The swap agreement exchanged the fixed interest rate for a variable interest rate on
$75.0 million of the $175.0 million principal amount outstanding.

The effective income tax rate for
continuing operations for fiscal 2004 was 25.3% compared with 30.5% in fiscal 2003. On
February 4, 2004, we received a Notice of Proposed Adjustment (NOPA) from the
Internal Revenue Service covering the audit of research and development tax credits for
fiscal years 1997 through 1999. As a result of the NOPA and the expectation of a similar
result for fiscal years 2000 through 2003, we revised our estimated liability for income
taxes during the first quarter of fiscal 2004. The revision resulted in a
$1.9 million reduction of previously estimated tax liabilities. The effective tax
rate differed from the statutory rate in fiscal 2004 and 2003, as both years benefited
from various tax credits. The current years results benefited from the 18-month
extension by the U.S. Congress of the Research and Experimentation Credit from
June 30, 2004 to December 31, 2005. We expect this extension to benefit us in
fiscal 2005 as well. In addition, the U.S. Congress passed a bill that phases out certain
export incentives beginning in fiscal 2005, which will slightly increase our effective tax
rate. We expect this increase to be more than offset beginning in fiscal 2006 by the
phase-in of tax incentives for domestic manufacturing. While one of the provisions of this
tax bill allows for the repatriation of undistributed earnings of foreign subsidiaries at
potentially favorable rates, our accumulated earnings of foreign subsidiaries are
considered indefinitely reinvested.

Income from continuing operations was
$33.4 million, or $1.55 per share on a diluted basis, compared with
$29.7 million, or $1.41 per share, in the prior year. Net earnings were
$42.6 million, or $1.98 per share on a diluted basis in fiscal 2004, compared with
net earnings of $23.9 million, or $1.13 per share, in the prior year. Net earnings in
fiscal 2004 included net

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income of $9.2 million, or $.43 per share, from discontinued
operations. Net earnings in fiscal 2003 included a loss of $5.8 million, or ($.28)
per diluted share, from discontinued operations.

New orders for fiscal 2004 were
$760.4 million compared with $581.6 million for fiscal 2003. Avionics &
Controls orders for fiscal 2004 increased 34.8% from the prior year period and reflected
the acquisition of the Leach medical unit and AVISTA and a $7.3 million cockpit panel
retrofit order. Sensors & Systems orders for fiscal 2004 increased 83.9% from the
prior year period and reflected the acquisitions of Leach and Weston. Advanced Materials
orders for fiscal 2004 decreased 6.2% from the prior year period and reflected lower
program requirements for combustible ordnance. Backlog at the end of fiscal 2004 was
$433.1 million compared with $300.9 million at the end of the prior year. The
increase in backlog principally reflects the Leach acquisition. Approximately
$70.6 million is scheduled to be delivered after fiscal 2005. Backlog is subject to
cancellation until delivery.

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# Fiscal 2003 Compared
with Fiscal 2002

Sales for fiscal 2003 increased 29.4% over
the prior year. Sales by segment were as follows:

Dollars In Thousands

|                    | Increase (Decrease) |  | 
|------------------- | ------------------- |  | 
|                    |                    
|                    |                     |  | 
|Avionics & Controls |                     |  | 
|Sensors & Systems   |                     |  | 
|Advanced Materials  |                     |  | 
|Other               |                     |  | 
|                   
|Total               |                     |  | 
|                   

The 15.5% increase in
Avionics & Controls principally reflected improved sales volumes of specialized
medical equipment, technology interface systems for land-based military vehicles and
cockpit switches for a defense retrofit program. Shipments under the retrofit program were
substantially completed in November 2003. The increase also reflected sales of
$10.6 million from the acquisition of Janco Corporation (Janco) and a small product
line in the third and fourth quarters of fiscal 2002, respectively. Airline spares sales
were comparable to fiscal 2002, but were lower than historical levels.

The 40.1% increase in
Sensors & Systems principally reflected $25.5 million in incremental sales
from the Weston Group and BVR Aero Precision Corporation (BVR) acquisitions in the third
and first quarters of fiscal 2003, respectively. The increase also reflected a stronger
euro relative to the U.S. dollar, as the average exchange rate from the euro to the U.S.
dollar increased from 0.92 in fiscal 2002 to 1.09 in fiscal 2003. Sales were also
bolstered by increased sales volumes of a product line for which we act as a distributor
to the British MoD. These shipments to the British MoD were completed in May 2003. The
increase in Sensors & Systems sales was partially offset by lower aftermarket
spares sales.

The 37.7% increase in Advanced
Materials reflected incremental sales totaling $55.6 million from the acquisition of
Burke Industries Engineered Polymers Group (Polymers Group) in the third quarter of
fiscal 2002 and the Electronic Warfare Passive Expendables Division of BAE SYSTEMS North
America (Countermeasures) in the fourth quarter of fiscal 2002. Sales were also enhanced
by increased sales of combustible ordnance components. These sales increases were
partially offset by lower sales of elastomer material to commercial aerospace and
industrial/commercial customers, principally reflecting the downturn in both markets as
well as the suspension of NASAs shuttle flights.

Sales to foreign customers, including
export sales by domestic operations, totaled $184.5 million and $140.1 million,
and accounted for 32.8% and 32.2% of our sales for fiscal 2003 and 2002, respectively.

Overall, gross margin as a percentage
of sales was 31.8% and 32.6% for fiscal 2003 and 2002, respectively. Avionics &
Controls segment gross margin was 33.7% and 32.7% for fiscal 2003 and 2002, respectively.
The increase in Avionics & Controls gross margin from fiscal 2002 was

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due to solid sales to military OEMs, higher sales of input devices to medical and defense
customers and improved cost control. Sensors & Systems segment gross margin was 34.0% and
38.7% for fiscal 2003 and 2002, respectively. The decrease in Sensors & Systems
gross margin from fiscal 2002 was largely due to the effect of a weaker U.S. dollar
compared to the euro on U.S. dollar-denominated sales and euro-based cost of sales and the
increased sales of a product line for which we acted as a distributor and realized lower
margins. In addition, Sensors & Systems gross margin was impacted by the shipment
of acquired inventories of the Weston Group, which were valued at fair market value at
acquisition in accordance with generally accepted accounting principles. Advanced
Materials segment gross margin was 28.3% and 27.8% for fiscal 2003 and 2002, respectively.
The increase in Advanced Materials gross margin reflected higher sales volumes as well as
improved product mix, and was partially offset by decreased recovery of fixed costs at our
specialized metal finishing unit.

Selling, general and administrative
expenses (which include corporate expenses) increased to $107.8 million in fiscal
2003 compared with $79.1 million in the prior year. As a percentage of sales,
selling, general and administrative expenses were 19.2% and 18.2% in fiscal 2003 and 2002,
respectively. The increase in selling, general and administrative expenses primarily
reflected increased amortization of intangible assets, incremental expenses from
acquisitions completed in fiscal 2002 and 2003, the effect of a stronger euro relative to
the U.S. dollar on selling, general and administrative expenses of our Sensors &
Systems business, and increased pension and medical expenses.

Research, development and related
engineering spending increased to $19.5 million, or 3.5% of sales, in fiscal 2003
compared with $15.4 million, or 3.5% of sales, in the prior year. This is consistent
with our philosophy of continually investing in new products and capabilities regardless
of the business cycle.

Segment earnings (which exclude
corporate expenses) increased 15.0% during fiscal 2003 to $68.2 million compared to
$59.3 million in the prior year. Avionics & Controls segment earnings
increased 12.4% during fiscal 2003 to $29.8 million. This increase reflected earnings
from increased sales of specialized medical equipment, technology interface systems for
land-based military vehicles, and cockpit switches to military OEMs, and was partially
offset by higher selling, general and administrative expenses. Sensors & Systems
segment earnings decreased 18.3% during fiscal 2003 to $10.1 million. This decrease
in Sensors & Systems was primarily due to the effect of a weaker U.S. dollar
relative to the euro on U.S. dollar-denominated sales and euro-based operating expenses,
integration expenses and the impact of the shipment of acquired inventories of the Weston
Group, which were valued at fair market value at acquisition in accordance with generally
accepted accounting principles. Advanced Materials segment earnings increased 33.1% during
fiscal 2003 to $29.1 million. This increase was principally from acquisitions and was
partially offset by a three-week shutdown of a countermeasure facility in the second
quarter of fiscal 2003. In addition, Advanced Materials earnings were impacted by lower
sales of elastomer products to aerospace and industrial commercial customers, integration
expenses and operating losses at our specialized metal finishing unit.

On June 11, 2003, we
acquired a group of companies referred to as the Weston Group for U.K.
£55.0 million in cash (approximately $94.6 million based on the closing
exchange rate and

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including acquisition costs). We hedged the U.K. £55.0 million cash price using foreign currency forward contracts and recorded
a foreign currency gain of approximately $2.7 million at closing of the acquisition
and settlement of foreign currency forward contracts.

Interest income decreased to
$0.9 million during fiscal 2003 compared with $1.8 million in the prior year,
reflecting the use of cash and cash equivalents for acquisitions and a decline in
prevailing interest rates. Interest expense increased to $12.0 million during fiscal
2003 compared with $7.1 million in the prior year, due to the issuance of
$175.0 million in 7.75% Senior Subordinated Notes due June 15, 2013. In
September 2003, we entered into an interest rate swap agreement on $75.0 million of
our Senior Subordinated Notes due in 2013. The swap agreement exchanged the fixed interest
rate for a variable interest rate on $75.0 million of the $175.0 million
principal amount outstanding.

The effective income tax rate for
continuing operations for fiscal 2003 was 30.5% compared with 25.1% in fiscal 2002. The
effective tax rate differed from the statutory rate in fiscal 2003 and 2002, as both years
benefited from various tax credits. In addition, in fiscal 2002, we recognized a
$2.9 million reduction in income taxes associated with the favorable resolution of
ongoing income tax audits. Additionally, the relative effect of export tax benefits and
research and development tax credits was higher in fiscal 2002 due to the reduction in
income from continuing operations before income taxes.

Income from continuing operations was
$29.7 million, or $1.41 per share on a diluted basis, compared with
$31.3 million, or $1.49 per share, in the prior year. Net earnings were
$23.9 million, or $1.13 per share on a diluted basis in fiscal 2003, compared with a
net loss of $1.3 million, or ($.06) per share, in the prior year. Net earnings in
fiscal 2003 included a loss of $5.8 million, or ($.28) per diluted share, from
discontinued operations. The net loss in fiscal 2002 included a loss from discontinued
operations of $25.0 million, or ($1.19) per diluted share and a $7.6 million
charge, or ($.36) per diluted share, for the cumulative effect of an accounting change as
a result of the adoption of Financial Accounting Standards Board No. 142,
Goodwill and Other Intangible Assets (Statement No. 142).

Orders received in fiscal 2003
increased 17.5% to $581.6 million from $495.0 million in the prior year. Backlog
at the end of fiscal 2003 was $300.9 million compared with $281.7 million at the
end of the prior year. Backlog increased sequentially from the fourth quarter of fiscal
2002 to the third quarter of fiscal 2003, principally reflecting the increase in
combustible ordnance orders and the acquisition of the Weston Group on
June 11, 2003. The acquisition of the Weston Group represented approximately
$15.4 million of the increase in backlog from fiscal 2002. Avionics &
Controls backlog declined sequentially from the end of the fourth quarter of fiscal 2002
to October 31, 2003, reflecting lower orders for cockpit switches, panels and
displays.

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# Liquidity and Capital
Resources

Working Capital and Statement of Cash FlowsCash and cash equivalents at the end
of fiscal 2004 totaled $29.5 million, a decrease of $114.7 million from the
prior year, including a $12.8 million decrease in short-term investments. Net working
capital decreased to $170.5 million at the end of fiscal 2004 from
$222.4 million at the end of the prior year. Sources of cash flows from operating
activities principally consist of cash received from the sale of products offset by cash
payments for material, labor and operating expenses. Cash flows from operating activities
were $62.3 million and $64.9 million in fiscal 2004 and 2003, respectively. The
decrease principally reflected lower cash receipts from accounts receivable collections
and increased payments for inventories, partially offset by higher net earnings, depreciation
and amortization, a U.S. income tax refund, and the timing of making income tax payments.
The decrease in cash flows used by investing activities primarily reflected the
acquisition of Leach in the third fiscal quarter of 2004, partially offset by the proceeds
from the sale of W. A. Whitney and a product line in the Sensors & Systems
segment. The decrease in cash provided by financing activities principally reflected the
issuance of $175.0 million of Senior Subordinated Notes in the prior years
third fiscal quarter and the repayment of $30.0 million of the 1999 Senior Notes in
fiscal 2004.

Capital ExpendituresNet property, plant and equipment was
$145.1 million at the end of fiscal 2004 compared with $117.1 million at the end
of the prior year. Capital expenditures for fiscal 2004 were $22.1 million (excluding
acquisitions) and included machinery and equipment and enhancements to information
technology systems. Capital expenditures are anticipated to approximate $22.0 million
for fiscal 2005. We will continue to support expansion through investments in
infrastructure including machinery, equipment, buildings and information systems.

Debt FinancingTotal debt decreased
$22.5 million from the prior year to $257.1 million at the end of fiscal 2004.
Total debt outstanding at the end of fiscal 2004 consisted of $175.0 million under
our Senior Subordinated Notes, $70.0 million under our 1999 Senior Notes and
$12.1 million under our credit facility and various foreign currency debt agreements, including capital lease
obligations. The Senior Subordinated Notes are due June 15, 2013 at an interest
rate of 7.75%. In September 2003 we entered into an interest rate swap agreement on
$75.0 million of our Senior Subordinated Notes due in 2013. The swap agreement
exchanged the fixed interest rate for a variable interest rate on $75.0 million of
the $175.0 million principal amount outstanding. The 1999 Senior Notes have
maturities ranging from 5 to 10 years and interest rates from 6.00% to 6.77%;
$30.0 million of the Senior Notes matured and was paid in November 2003. We believe
cash on hand, funds generated from operations and other available debt facilities are
sufficient to fund operating cash requirements and capital expenditures through fiscal
2005. In addition, we believe we have adequate access to capital markets to fund future
acquisitions.

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Pension ObligationsOur pension plans, which principally
include a U.S. pension plan maintained by Esterline and U.S. and non-U.S. plans maintained
by Leach, are under-funded $24.0 million at October 29, 2004. This under-funding
resulted from the acquisition of Leach and assumption of its under-funded pension plans.
We account for pension expense using the end of the fiscal year as our measurement date
and we make actuarially computed contributions to our pension plans as necessary to
adequately fund benefits. Our funding policy is consistent with the minimum funding
requirements of ERISA. In fiscal 2004, operating cash flow included $0.5 million of
cash funding to these pension plans. We expect pension funding requirements to be
approximately $2.4 million to $2.8 million in fiscal 2005, which will be made to
the Leach pension plans; the U.S. Esterline pension plan is not expected to require any
contributions in 2005. The rate of increase in future compensation levels is consistent
with our historical experience and salary administration policies. The expected long-term
rate of return on plan assets is based on long-term target asset allocations of 70% equity
and 30% fixed income. We periodically review allocations of plan assets by investment type and evaluate external
sources of information regarding long-term historical returns and expected future returns for each investment
type and, accordingly, believe an 8.5% assumed long-term rate of return on plan assets is appropriate. Current allocations are consistent with the long-term targets.

We made the following assumptions
with respect to our pension obligation in 2004 and 2003:

|                                                | 2004 |  | 2003 |     
|----------------------------------------------- | ---- |  | ---- | ----
|Principal assumptions as of fiscal year end:    |      |  |      |     
|Discount Rate                                   |      |  |      | 6.0%
|Rate of increase in future compensation levels  |      |  |      | 4.5%
|Assumed long-term rate of return on plan assets |      |  |      | 8.5%

We use a discount rate for expected
returns that is based on a point-in-time estimate as of each fiscal year end
measurement date. Although future changes to the discount rate are unknown, had the
discount rate increased or decreased by 25 basis points, pension liabilities in total
would have decreased $4.3 million or increased $4.5 million, respectively. We
are not aware of any legislative or other initiatives or circumstances that will
significantly impact our pension obligations in fiscal 2005.

Research and Development ExpenseFor the three years ended
October 29, 2004, research and development expense has averaged 3.8% of sales. In
fiscal 2004, we began bidding and winning new aerospace programs which will result in
increased company-funded research and development. We estimate that research and
development expense will range between 4.5% to 5% of sales in fiscal 2005.

AcquisitionsOn August 27, 2004, we acquired
all of the outstanding capital stock of Leach Holding Corporation (Leach), a
$119 million (sales) manufacturer of electrical power switching, control, and data
communication devices for the aerospace industry, for approximately $145.0 million in
cash before acquisition costs and an adjustment for the change in working capital from
December 31, 2003 to closing, pursuant to an Agreement and Plan of Merger dated as of
July 8,

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2004. Leach also manufactures medical diagnostic, therapeutic and patient
monitoring devices, and analytical, optical and biosensor instruments for medical,
laboratory and industrial applications. The acquisition expands our
capabilities in providing solutions to our customers complex engineering
requirements. The aerospace business is included in the Sensors & Systems segment
and the medical business is included in the Avionics & Controls segment. We used
existing cash and our credit facilities to finance the acquisition.

On December 1, 2003, we
acquired all of the outstanding capital stock of AVISTA, a $10 million (sales)
Wisconsin-based developer of embedded avionics software, for approximately
$6.5 million. A contingent purchase price is payable to the seller in December 2004
and 2005 based upon the achievement of financial results as defined in the Stock Purchase
Agreement. The December 2004 purchase price adjustment is approximately $3.3 million,
which will be recorded in the first quarter of fiscal 2005 as additional consideration for
the acquired assets. AVISTA provides a software engineering center to support our
customers with such applications as primary flight displays, flight management systems,
air data computers and engine control systems. AVISTA is included in our
Avionics & Controls segment.

On June 11, 2003, we
acquired the Weston Group from The Roxboro Group PLC for U.K. £55.0 million in
cash (approximately $94.6 million based on the closing exchange rate and including
acquisition costs). The acquisition was financed with a portion of the proceeds from the
issuance of $175.0 million in 7.75% Senior Subordinated Notes due
June 15, 2013. In addition, the existing $50 million revolving line of
credit was replaced with a $60 million revolving line of credit. In
November 2003, $30.0 million of long-term Senior Notes, Series A, was paid
according to terms from available cash and cash equivalents.

Equity OfferingOn August 3, 2004, we filed a
shelf registration statement on Form S-3 registering $300.0 million of equity
and debt securities, which was declared effective on August 25, 2004. The shelf
registration statement enables us to issue equity and debt securities in response to
market conditions. On November 24, 2004 we completed a public offering of
3.7 million shares of common stock, including shares sold under the
underwriters over-allotment option, priced at $31.25 per share, generating net
proceeds of approximately $109 million, of which $5.0 million was used to pay
off existing credit facilities. The funds provide additional financial resources for
acquisitions and general corporate purposes.

-13-

---

# Contractual Obligations

The following table summarizes our
outstanding contractual obligations as of fiscal year end.

In Thousands

|                              |  |  | Less than |         | 1-3 |   | 4-5     |  | After 5 |       
|----------------------------- |  |  | --------- | ------- | --- | - | ------- |  | ------- | ------
|
|Long-term debt                |  |  | $         | 250,087 |     | $ | 2,800   |  | $       | 31,265
|Credit facilities             |  |  |           | 6,977   |     |   | 6,977   |  |         |      
|Operating lease obligations   |  |  |           | 53,995  |     |   | 8,945   |  |         | 16,063
|Purchase obligations          |  | 
|Not recorded on balance sheet |  |  |           | 70,187  |     |   | 63,118  |  |         | 6,360 
|Pension1                      |  |  |           | 2,400   |     |   | 2,400   |  |         |      
|Recorded on balance sheet     |  |  |           | 134,905 |     |   | 134,905 |  |         |      
|                              |  |  |           |         |     |   |         |  |         |       
|Total contractual obligations |  |  | $         | 518,551 |     | $ | 219,145 |  | $       | 53,688
|                              |  |  |           |         |     |   |         |  |         |       

|1 | Our
pension plan funding policy is consistent with the minimum funding requirements of ERISA.
 This table      reflects the amount of our expected pension funding under our U.S. plans
in fiscal 2005.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SeasonalityThe timing of our revenues is impacted by the purchasing patterns of our customers and, as a result, we do not
generate revenues evenly throughout the year.  Moreover, our first fiscal quarter, November through January,
includes significant holiday vacation periods in both Europe and North America.  This leads to decreased order and
shipment activity; consequently, first quarter results are typically weaker than other quarters and not necessarily
indicative of our performance in subsequent quarters.

# Disclosures About Market Risk

Interest Rate Risks
Our debt obligations are principally at a fixed rate and, accordingly, we are not subject to interest rate risk on
these obligations.  However, we are subject to interest rate risk on $75.0 million of our Senior Subordinated Notes
due in 2013.  We hold an interest rate swap agreement, which exchanged the fixed interest rate for a variable rate
on $75.0 million of the $175.0 million principal amount outstanding under our Senior Subordinated Notes due in
2013.  The following table provides information about our derivative financial instruments and other financial
instruments that are sensitive to changes in interest rates.  For long-term debt, the table presents principal cash
flows and the related weighted-average interest rates by contractual maturities.  For our interest rate swap, the
table presents notional amounts and, as applicable, the interest rate by contractual maturity date.

-14-

---

Dollars In Thousands

|              | Long-term Debt  Fixed Rate |  | Interest Rate Swap
|------------- | --------------------------- |  | ------------------
|
|2005          |                             |  | $                 
|2006          |                             |  |                   
|2007          |                             |  |                   
|2008          |                             |  |                   
|2009          |                             |  |                   
|Thereafter    |                             |  |                   
|              |                             |  |                   
|Total         |                             |  | $                 
|              |                             |  |                   
|              |                             |  |                   
|Fair Value at |                             |  |                   
|10/29/2004    |                             |  | $                 

|1 | The
average pay rate is LIBOR plus 2.56%.
|- | -----------------------------------------

Currency RisksTo the extent that sales are
transacted in a foreign currency, we are subject to foreign currency fluctuation risk.
Furthermore, we have assets denominated in foreign currencies that are not offset by
liabilities in such foreign currencies. Although we own significant operations in France,
Germany and the United Kingdom, historically we have not experienced material gains or
losses due to interest rate or foreign exchange fluctuations. In fiscal 2004, the foreign
exchange rate for the euro increased 10.5% relative to the U.S. dollar.

The following tables provide
information about our derivative financial instruments, including foreign currency forward
exchange agreements and certain firmly committed sales transactions denominated in
currencies other than the functional currency. The information about certain firmly
committed sales contracts and derivative financial instruments is in U.S. dollar
equivalents. For forward foreign currency exchange agreements, the table presents the
notional amounts at the current exchange rate and weighted-average contractual foreign
currency exchange rates by contractual maturity dates. The table does not include firmly
committed transactions that have not been hedged.

-15-

---

# Firmly Committed Sales
ContractsOperations with Foreign Functional Currency

# Principal Amount by
Expected MaturityAverage Foreign Currency Exchange Rate (USD/Foreign Currency)

In Thousands

|Fiscal Years |  | Euro
Firmly Committed
Sales Contracts
United States Dollar |  | U.K. Pound
Firmly Committed
Sales Contracts
United States Dollar
|------------ |  | ---------------------------------------------------------- |  | ----------------------------------------------------------------
|2005         |  |                                                            |  |                                                                 
|2006         |  |                                                            |  |                                                                 
|2007         |  |                                                            |  |                                                                 
|2008         |  |                                                            |  |                                                                 
|2009         |  |                                                            |  |                                                                 
|             | 
|Total        |  |                                                            |  |                                                                 
|             | 

-16-

---

# Derivative ContractsOperations with Foreign Functional Currency

# Notional Amount by
Expected MaturityAverage Foreign Currency Exchange Rate (USD/Foreign Currency)1

Dollars In Thousands

Related Forward Contracts
to Sell U.S. Dollar for Euro

|                         |  | United States Dollar
|------------------------ |  | --------------------
|
|2005                     |  |                     
|2006                     |  |                     
|                         |  |                     
|Total                    |  |                     
|                         |  |                     
|                         |  |                     
|Fair Value at 10/29/2004 |  |                     

Related Forward Contracts to Sell
U.S. Dollar for U.K. Pound

|                         |  | United States Dollar
|------------------------ |  | --------------------
|
|2005                     |  |                     
|2006                     |  |                     
|                         |  |                     
|Total                    |  |                     
|                         |  |                     
|                         |  |                     
|Fair Value at 10/29/2004 |  |                     

|1 | The
Company has no derivative contracts after fiscal 2006.
|- | ----------------------------------------------------------

-17-

---

Critical Accounting PoliciesOur financial statements and
accompanying notes are prepared in accordance with accounting principles generally
accepted in the United States. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses. Actual results may differ from estimates under different assumptions or
conditions. These estimates and assumptions are affected by our application of accounting
policies. Our critical accounting policies include revenue recognition, accounting for the
allowance for doubtful accounts receivable, accounting for inventories at the lower of
cost or market, accounting for goodwill and intangible assets in business combinations,
impairment of goodwill and intangible assets, accounting for legal contingencies, and
accounting for income taxes.

Revenue Recognition

We recognize revenue when the title
and risk of loss have passed to the customer, there is persuasive evidence of an
agreement, delivery has occurred or services have been rendered, the price is
determinable, and the collectibility is reasonably assured. We recognize product revenues
at the point of shipment or delivery in accordance with the terms of sale. Sales are net
of returns and allowances. Returns and allowances are not significant because products are
manufactured to customer specification and are covered by the terms of the product
warranty.

Allowance for Doubtful
Accounts

We establish an allowance for
doubtful accounts for losses expected to be incurred on accounts receivable balances.
Judgment is required in estimation of the allowance and is based upon specific
identification, collection history and creditworthiness of the debtor.

Inventories

We account for inventories on a
first-in, first-out or average cost method of accounting at the lower of its cost or
market as required under Accounting Research Bulletin No. 43 (ARB No. 43). The
application of ARB No. 43 requires judgment in estimating the valuation of
inventories. Such valuations require judgment in estimating future demand, selling prices
and cost of disposal.

Goodwill and Intangible
Assets in Business Combinations

We account for business combinations,
goodwill and intangible assets in accordance with Financial Accounting Standards
No. 141, Business Combinations (Statement No. 141) and Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets
(Statement No. 142). Statement No. 141 specifies the types of acquired
intangible assets that are required to be recognized and reported separately from goodwill.

-18-

---

Impairment of Goodwill
and Intangible Assets

Statement No. 142 requires
goodwill and certain intangible assets to be no longer amortized, but instead be tested
for impairment at least annually. We are also required to test goodwill for impairment
between annual tests if events occur or circumstances change that would more likely than
not reduce our enterprise fair value below its book value. These events or circumstances
could include a significant change in the business climate, including a significant
sustained decline in an entitys market value, legal factors, operating performance
indicators, competition, sale or disposition of a significant portion of the business, or
other factors.

The valuation of reporting units
requires judgment in estimating future cash flows, discount rates and estimated product
life cycles. In making these judgments, we evaluate the financial health of the business,
including such factors as industry performance, changes in technology and operating cash
flows.

Statement No. 142 outlines a
two-step process for testing goodwill for impairment. The first step (Step One) of the
goodwill impairment test involves estimating the fair value of a reporting unit. Statement
No. 142 defines fair value (Fair Value) as the amount at which an asset (or
liability) could be bought (or incurred) or sold (or settled) in a current transaction
between willing parties, that is, other than in a forced liquidation sale. A
reporting unit is generally defined at the operating segment level or at the component
level one level below the operating segment, if said component constitutes a business. The
Fair Value of a reporting unit is then compared to its carrying value, which is defined as
the book basis of total assets less total liabilities. In the event a reporting
units carrying value exceeds its estimated Fair Value, evidence of potential
impairment exists. In such a case, the second step (Step Two) of the impairment test is
required, which involves allocating the Fair Value of the reporting unit to all of the
assets and liabilities of that unit, with the excess of Fair Value over allocated net
assets representing the Fair Value of goodwill. An impairment loss is measured as the
amount by which the carrying value of the reporting units goodwill exceeds the
estimated Fair Value of goodwill.

As we have grown through
acquisitions, we have accumulated $247.8 million of goodwill and $22.5 million
of indefinite-lived intangible assets out of total assets of $932.8 million at
October 29, 2004. As a result, the amount of any annual or interim impairment could
be significant and could have a material adverse effect on our reporting financial results
for the period in which the charge is taken.

We performed our impairment review
for fiscal 2004 as of August 1, 2004, and our Step One analysis indicates that no
impairment of goodwill exists in any of the Companys reporting units. All but one of
the reporting units passes the Step One by what we believe to be a significant margin. The
remaining reporting unit, which has goodwill totaling $63.2 million, passes Step One
by a less significant margin. Our Step One test was based upon a market and discounted
cash flow valuation method. If events or circumstances change and if goodwill in this
reporting unit is determined to be impaired, an amount of up to $63.2 million could
be written off to expense.

-19-

---

Impairment of Long-lived
Assets

We account for the impairment of
long-lived assets to be held and used in accordance with Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
(Statement No. 144). Statement No. 144 requires that a long-lived asset to be
disposed of be reported at the lower of its carrying amount or fair value less cost to
sell. For business segments disposed of prior to the implementation of Statement
No. 144 in fiscal 2003, namely the Automation segment, we accounted for discontinued
operations in accordance with Accounting Principles Board Opinion No. 30,
Reporting the Results of Operations  Reporting the Effects of Disposal of a
Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions (APB No. 30). APB No. 30 requires that if a loss is expected,
it should be recorded at the measurement date when management commits to a plan to dispose
of a segment of a business. The loss from discontinuance is based upon estimates of net
realizable value and estimated losses from the measurement date to the expected disposal
date. Judgment is required to estimate the selling price, selling expenses and future
losses of the segment.

Contingencies

We are party to various lawsuits and
claims, both as plaintiff and defendant, and have contingent liabilities arising from the
conduct of business. We are covered by insurance for general liability, product liability,
workers compensation and certain environmental exposures, subject to certain deductible
limits. We are self-insured for amounts less than our deductible and where no insurance is
available. Financial Accounting Standards No. 5, Accounting for
Contingencies, requires that an estimated loss from a contingency should be accrued
by a charge to income if it is probable that an asset has been impaired or a liability has
been incurred and the amount of the loss can be reasonably estimated. Disclosure of a
contingency is required if there is at least a reasonable possibility that a loss has been
incurred. We evaluate, among other factors, the degree of probability of an unfavorable
outcome and the ability to make a reasonable estimate of the amount of loss.

Income Taxes

We account for income taxes in
accordance with Financial Accounting Standards No. 109, Accounting for Income
Taxes. The objectives of accounting for income taxes are to recognize the amount of
taxes payable or refundable for the current year and deferred tax liabilities and assets
for the future tax consequences of events that have been recognized in our financial
statements or tax returns. Judgment is required in assessing the future tax consequences
of events that have been recognized in our financial statements or tax returns. Variations
in the actual outcome of these future tax consequences could materially impact our
financial position and results of operations.

Recent Accounting PronouncementsIn December 2004,
the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123R,
Share-Based Payment, which is effective for public

-20-

---

companies for interim or annual periods
beginning after June 15, 2005.  This statement will have a
significant impact on our consolidated statements of operations, as we will be required to
expense the fair value of our stock option grants and stock purchases under our employee
stock purchase plan rather than disclose the impact on our consolidated net income within
our footnotes as is our current practice. We intend to comply with the standard upon its effectiveness; however, we do not
believe that the impact would be materially different from our pro forma disclosures as
described in Note 1 to the Consolidated Financial Statements of Esterline
Technologies Corporation appearing on page 33.

-21-

---

Selected Financial Data

In Thousands, Except Per
Share Amounts

|For Fiscal Years          | 2004 |  | 2003 |         | 2002 |   | 2001    |   | 2000 |        
|------------------------- | ---- |  | ---- | ------- | ---- | - | ------- | - | ---- | -------
|                          |      |  |      |         |      |   |         |   |      |        
|Operating Results1        |      |  |      |         |      |   |         |   |      |        
|Net sales                 |      |  | $    | 628,169 |      | $ | 562,454 |   | $    | 434,809
|Cost of sales             |      |  |      | 426,612 |      |   | 383,825 |   |      | 293,236
|Selling, general          |      | 
|and administrative        |      |  |      | 117,689 |      |   | 107,797 |   |      | 79,086 
|Research, development     |      | 
|and engineering           |      |  |      | 27,715  |      |   | 19,524  |   |      | 15,433 
|Other income              |      |  |      | (509    | )    |   |        |   |      |       
|Loss (gain) on sale       |      | 
|of product line           |      |  |      | (3,434  | )    |   | 66      |   |      |       
|Insurance settlement      |      |  |      |        |      |   |        |   |      |       
|Loss (gain) on derivative |      | 
|financial instruments     |      |  |      |        |      |   | (2,676  | ) |      | 1      
|Interest income           |      |  |      | (1,964  | )    |   | (868    | ) |      | (1,814 
|Interest expense          |      |  |      | 17,339  |      |   | 11,995  |   |      | 7,122  
|Income from               |      | 
|continuing operations     |      | 
|before income taxes       |      |  |      | 44,721  |      |   | 42,791  |   |      | 41,745 
|                          |      |  |      |         |      |   |         |   |      |        
|Income tax expense        |      |  |      | 11,325  |      |   | 13,050  |   |      | 10,461 
|Income from               |      | 
|continuing operations     |      |  |      | 33,374  |      |   | 29,741  |   |      | 31,284 
|Income (loss) from        |      | 
|discontinued              |      | 
|operations, net of tax    |      |  |      | 9,181   |      |   | (5,808  | ) |      | (25,039
|Cumulative effect of a    |      | 
|change in                 |      | 
|accounting principle      |      |  |      |        |      |   |        |   |      | (7,574 
|Net earnings (loss)       |      |  |      | 42,555  |      |   | 23,933  |   |      | (1,329 
|                          |      |  |      |         |      |   |         |   |      |        
|Earnings (loss) per       |      | 
|share  diluted:          |      | 
|Continuing                |      | 
|operations                |      |  | $    | 1.55    |      | $ | 1.41    |   | $    | 1.49   
|Discontinued              |      | 
|operations                |      |  |      | .43     |      |   | (.28    | ) |      | (1.19  
|Cumulative effect         |      | 
|of a change in            |      | 
|accounting principle      |      |  |      |        |      |   |        |   |      | (.36   
|Earnings (loss) per       |      | 
|share  diluted           |      |  |      | 1.98    |      |   | 1.13    |   |      | (.06   
|                         

-22-

---

Selected Financial Data

In Thousands, Except Per Share
Amounts

|For Fiscal Years        | 2004 |  | 2003 |         | 2002 |   | 2001    |  | 2000 |        
|----------------------- | ---- |  | ---- | ------- | ---- | - | ------- |  | ---- | -------
|                        |      |  |      |         |      |   |         |  |      |        
|Financial Structure     |      |  |      |         |      |   |         |  |      |        
|Total assets            |      |  | $    | 932,833 |      | $ | 800,630 |  | $    | 570,955
|Long-term debt, net     |      |  |      | 249,056 |      |   | 246,792 |  |      | 102,133
|Shareholders' equity    |      |  |      | 458,513 |      |   | 393,872 |  |      | 354,441
|                        |      |  |      |         |      |   |         |  |      |        
|Weighted average shares |      | 
|outstanding  diluted   |      |  |      | 21,539  |      |   | 21,105  |  |      | 21,021 
|                       

|1 | Operating
results for 2004 through 2000 and balance sheet items for 2003 through 2002 reflect the
segregation of continuing operations from discontinued operations. See Note 3 to the
Consolidated Financial Statements.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|For Fiscal Years       | 2004 |  | 2003 |        | 2002 |   | 2001   |  | 2000 |       
|---------------------- | ---- |  | ---- | ------ | ---- | - | ------ |  | ---- | ------
|                       |      |  |      |        |      |   |        |  |      |       
|Other Selected Data2   |      |  |      |        |      |   |        |  |      |       
|EBITDA from continuing |      | 
|operations             |      |  | $    | 85,523 |      | $ | 75,401 |  | $    | 61,891
|Capital expenditures   |      |  |      | 22,065 |      |   | 17,068 |  |      | 15,129
|Interest expense       |      |  |      | 17,339 |      |   | 11,995 |  |      | 7,122 
|                       |      |  |      |        |      |   |        |  |      |       
|Depreciation and       |      | 
|amortization from      |      | 
|continuing operations  |      |  |      | 29,370 |      |   | 24,093 |  |      | 14,837

|2 | EBITDA
from continuing operations is a measurement not calculated in accordance with GAAP. We
define EBITDA from continuing operations as operating earnings from continuing operations
plus depreciation and amortization (excluding amortization of debt issuance cost). We do not intend EBITDA from continuing operations to
represent cash flows from continuing operations or any other items calculated in
accordance with GAAP, or as an indicator of Esterlines operating performance. Our
definition of EBITDA from continuing operations may not be comparable with EBITDA from
continuing operations as defined by other companies. We believe EBITDA is commonly used
by financial analysts and others in the aerospace and defense industries and thus
provides useful information to investors. Our management and certain financial creditors
use EBITDA as one measure of our leverage capacity and debt servicing ability, and is
shown here with respect to Esterline for comparative purposes. EBITDA is not necessarily
indicative of amounts that may be available for discretionary uses by us. The following
table reconciles operating earnings from continuing operations to EBITDA from continuing
operations.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-23-

---

In Thousands

|For Fiscal Years   | 2004 |  | 2003 |        | 2002 |   | 2001   |  | 2000 |       
|------------------ | ---- |  | ---- | ------ | ---- | - | ------ |  | ---- | ------
|                   |      |  |      |        |      |   |        |  |      |       
|Operating earnings |      |  |      |        |      |   |        |  |      |       
|from continuing    |      | 
|operations         |      |  | $    | 56,153 |      | $ | 51,308 |  | $    | 47,054
|Depreciation and   |      | 
|amortization from  |      | 
|continuing         |      | 
|operations         |      |  |      | 29,370 |      |   | 24,093 |  |      | 14,837
|                  
|EBITDA from        |      | 
|continuing         |      | 
|operations         |      |  | $    | 85,523 |      | $ | 75,401 |  | $    | 61,891
|                  

-24-

---

Market Price of Esterline
Common Stock

In Dollars

|For Fiscal Years | 2004 |  | 2003
|---------------- | ---- |  | ----
|
|Quarter          |      |  |     
|First            |      |  | $   
|Second           |      |  |     
|Third            |      |  |     
|Fourth           |      |  |     
|                

Principal Market 
New York Stock Exchange

At the end of fiscal 2004, there were
approximately 600 holders of record of our common stock.

No cash dividends were paid during
fiscal 2004 and 2003. We currently intend to retain all future earnings for use to expand
the business or retire debt. We are restricted from paying dividends under our current
credit facility and do not anticipate paying any dividends in the foreseeable future.

-25-

---

Consolidated Statement of
Operations

In Thousands, Except Per
Share Amounts

|For Each of the Three Fiscal Years
in the Period Ended October 29, 2004 | 2004 |  | 2003 |         | 2002 |  
|----------------------------------------------------------------------- | ---- |  | ---- | ------- | ---- | -
|                                                                        |      |  |      |         |      |  
|Net Sales                                                               |      |  | $    | 628,169 |      | $
|Cost of Sales                                                           |      |  |      | 426,612 |      |  
|                                                                       
|                                                                        |      |  |      | 201,557 |      |  
|Expenses                                                                |      | 
|Selling, general and administrative                                     |      |  |      | 117,689 |      |  
|Research, development                                                   |      | 
|and engineering                                                         |      |  |      | 27,715  |      |  
|                                                                       
|Total Expenses                                                          |      |  |      | 145,404 |      |  
|                                                                       
|Operating Earnings From                                                 |      | 
|Continuing Operations                                                   |      |  |      | 56,153  |      |  
|                                                                        |      |  |      |         |      |  
|Other income                                                            |      |  |      | (509    | )    |  
|Loss (gain) on sale of product line                                     |      |  |      | (3,434  | )    |  
|Loss (gain) on derivative                                               |      | 
|financial instruments                                                   |      |  |      |        |      |  
|Interest income                                                         |      |  |      | (1,964  | )    |  
|Interest expense                                                        |      |  |      | 17,339  |      |  
|                                                                       
|Other Expense, Net                                                      |      |  |      | 11,432  |      |  
|                                                                       
|                                                                        |      |  |      |         |      |  
|Income From Continuing Operations                                       |      | 
|Before Income Taxes                                                     |      |  |      | 44,721  |      |  
|Income Tax Expense                                                      |      |  |      | 11,325  |      |  
|                                                                       
|Income From Continuing Operations                                       |      | 
|Before Minority Interest                                                |      |  |      | 33,396  |      |  
|                                                                        |      |  |      |         |      |  
|Minority Interest                                                       |      |  |      | (22     | )    |  
|                                                                       
|Income From Continuing Operations                                       |      |  |      | 33,374  |      |  
|                                                                        |      |  |      |         |      |  
|Income (Loss) From Discontinued Operations,                             |      | 
|Net of Tax                                                              |      |  |      | 9,181   |      |  
|                                                                       
|                                                                        |      |  |      |         |      |  
|Earnings Before Cumulative                                              |      | 
|Effect of a Change in Accounting Principle                              |      |  |      | 42,555  |      |  
|                                                                        |      |  |      |         |      |  
|Cumulative Effect of a Change in                                        |      | 
|Accounting Principle, Net of Tax                                        |      |  |      |        |      |  
|                                                                       
|                                                                        |      |  |      |         |      |  
|Net Earnings (Loss)                                                     |      |  | $    | 42,555  |      | $
|                                                                       

-26-

---

Consolidated Statement of
Operations

In Thousands, Except Per
Share Amounts

|For Each of the Three Fiscal Years
in the Period Ended October 29, 2004 | 2004 |  | 2003 |      | 2002 |  
|----------------------------------------------------------------------- | ---- |  | ---- | ---- | ---- | -
|                                                                        |      |  |      |      |      |  
|Earnings (Loss) Per Share  Basic:                                      |      |  |      |      |      |  
|Continuing operations                                                   |      |  | $    | 1.57 |      | $
|Discontinued operations                                                 |      |  |      | .44  |      |  
|                                                                       
|Earnings per share before                                               |      | 
|cumulative effect of a change in                                        |      | 
|accounting principle                                                    |      |  |      | 2.01 |      |  
|Cumulative effect of a change                                           |      | 
|in accounting principle                                                 |      |  |      |     |      |  
|                                                                       
|Earnings (Loss) Per Share  Basic                                       |      |  | $    | 2.01 |      | $
|                                                                       
|                                                                        |      |  |      |      |      |  
|Earnings (Loss) Per Share  Diluted:                                    |      | 
|Continuing operations                                                   |      |  | $    | 1.55 |      | $
|Discontinued operations                                                 |      |  |      | .43  |      |  
|                                                                       
|Earnings per share before                                               |      | 
|cumulative effect of a change in                                        |      | 
|accounting principle                                                    |      |  |      | 1.98 |      |  
|Cumulative effect of a change                                           |      | 
|in accounting principle                                                 |      |  |      |     |      |  
|                                                                       
|Earnings (Loss) Per Share  Diluted                                     |      |  | $    | 1.98 |      | $
|                                                                       

See Notes to Consolidated
Financial Statements.

-27-

---

Consolidated Balance Sheet

In Thousands, Except
Share and Per Share Amounts

|As of October 29, 2004 and October 31, 2003 | 2004 |  | 2003 |        
|------------------------------------------- | ---- |  | ---- | -------
|                                            |      |  |      |        
|Assets                                      |      |  |      |        
|                                            |      |  |      |        
|Current Assets                              |      | 
|Cash and cash equivalents                   |      |  | $    | 29,479 
|Cash in escrow                              |      |  |      | 8,511  
|Short-term investments                      |      |  |      |       
|Accounts receivable, net of allowances      |      | 
|of $3,687 and $2,669                        |      |  |      | 132,206
|Inventories                                 |      |  |      | 119,054
|Income tax refundable                       |      |  |      |       
|Deferred income tax benefits                |      |  |      | 20,984 
|Prepaid expenses                            |      |  |      | 9,441  
|Other current assets                        |      |  |      | 435    
|                                           
|Total Current Assets                        |      |  |      | 320,110
|                                            |      |  |      |        
|Property, Plant and Equipment               |      | 
|Land                                        |      |  |      | 17,341 
|Buildings                                   |      |  |      | 80,998 
|Machinery and equipment                     |      |  |      | 177,098
|                                           
|                                            |      |  |      | 275,437
|Accumulated depreciation                    |      |  |      | 130,302
|                                           
|                                            |      |  |      | 145,135
|                                            |      |  |      |        
|Other Non-Current Assets                    |      | 
|Goodwill                                    |      |  |      | 247,817
|Intangibles, net                            |      |  |      | 169,876
|Debt issuance costs, net of accumulated     |      | 
|amortization of $928 and $244               |      |  |      | 5,818  
|Deferred income tax benefits                |      |  |      | 11,216 
|Other assets                                |      |  |      | 32,861 
|                                           
|Total Assets                                |      |  | $    | 932,833
|                                           

See Notes to Consolidated
Financial Statements.

-28-

---

|As of October 29, 2004 and October 31, 2003  | 2004 |  | 2003 |        
|-------------------------------------------- | ---- |  | ---- | -------
|                                             |      |  |      |        
|Liabilities and Shareholders' Equity         |      |  |      |        
|                                             |      |  |      |        
|Current Liabilities                          |      | 
|Accounts payable                             |      |  | $    | 37,867 
|Accrued liabilities                          |      |  |      | 97,038 
|Credit facilities                            |      |  |      | 6,977  
|Current maturities of long-term debt         |      |  |      | 1,031  
|Federal and foreign income taxes             |      |  |      | 6,678  
|                                            
|Total Current Liabilities                    |      |  |      | 149,591
|                                             |      |  |      |        
|Long-Term Liabilities                        |      | 
|Long-term debt, net of current maturities    |      |  |      | 249,056
|Deferred income taxes                        |      |  |      | 43,443 
|Other liabilities                            |      |  |      | 29,852 
|                                             |      |  |      |        
|Commitments and Contingencies                |      |  |      |       
|Net Liabilities of Discontinued Operations   |      |  |      |       
|                                             |      |  |      |        
|Minority Interest                            |      |  |      | 2,378  
|                                             |      |  |      |        
|Shareholders' Equity                         |      | 
|Common stock, par value $.20 per share,      |      | 
|authorized 60,000,000 shares, issued and     |      | 
|outstanding 21,319,698 and 21,062,999 shares |      |  |      | 4,264  
|Additional paid-in capital                   |      |  |      | 120,553
|Retained earnings                            |      |  |      | 309,155
|Accumulated other comprehensive income       |      |  |      | 24,541 
|                                            
|Total Shareholders' Equity                   |      |  |      | 458,513
|                                            
|Total Liabilities and Shareholders' Equity   |      |  | $    | 932,833
|                                            

See Notes to Consolidated Financial
Statements.

-29-

---

Consolidated Statement of
Cash Flows

In Thousands

|For Each of the Three Fiscal Years
in the Period Ended October 29, 2004 | 2004 |  | 2003 |          | 2002 |  
|----------------------------------------------------------------------- | ---- |  | ---- | -------- | ---- | -
|                                                                        |      |  |      |          |      |  
|Cash Flows Provided (Used)                                              |      |  |      |          |      |  
|by Operating Activities                                                 |      | 
|Net earnings (loss)                                                     |      |  | $    | 42,555   |      | $
|Minority interest                                                       |      |  |      | 22       |      |  
|Depreciation and amortization                                           |      |  |      | 31,145   |      |  
|Deferred income tax (benefit)                                           |      |  |      | 3,582    |      |  
|Loss (gain) on disposal and holding period                              |      | 
|loss on discontinued operations                                         |      |  |      | (12,521  | )    |  
|Gain on sale of land                                                    |      |  |      | (892     | )    |  
|Loss (gain) on sale of product line                                     |      |  |      | (3,434   | )    |  
|Working capital changes, net of                                         |      | 
|effect of acquisitions                                                  |      | 
|Accounts receivable                                                     |      |  |      | (9,032   | )    |  
|Inventories                                                             |      |  |      | (9,095   | )    |  
|Prepaid expenses                                                        |      |  |      | (659     | )    |  
|Accounts payable                                                        |      |  |      | 2,600    |      |  
|Accrued liabilities                                                     |      |  |      | 10,240   |      |  
|Federal and foreign income taxes                                        |      |  |      | 8,951    |      |  
|Other liabilities                                                       |      |  |      | 4,359    |      |  
|Other, net                                                              |      |  |      | (5,530   | )    |  
|                                                                       
|                                                                        |      |  |      | 62,291   |      |  
|                                                                       
|                                                                        |      |  |      |          |      |  
|Cash Flows Provided (Used)                                              |      | 
|by Investing Activities                                                 |      | 
|Purchases of capital assets                                             |      |  |      | (22,126  | )    |  
|Proceeds from sale of discontinued operations                           |      |  |      | 10,000   |      |  
|Proceeds from sale of product line                                      |      |  |      | 3,475    |      |  
|Proceeds from sale of land                                              |      |  |      | 1,654    |      |  
|Escrow deposit                                                          |      |  |      | (12,500  | )    |  
|Capital dispositions                                                    |      |  |      | 778      |      |  
|Purchase of short-term investments                                      |      |  |      |         |      |  
|Sale of short-term investments                                          |      |  |      | 12,797   |      |  
|Acquisitions of businesses,                                             |      | 
|net of cash acquired                                                    |      |  |      | (138,811 | )    |  
|                                                                       
|                                                                        |      |  |      | (144,733 | )    |  
|                                                                       

-30-

---

|For Each of the Three Fiscal Years
in the Period Ended October 29, 2004 | 2004 |  | 2003 |          | 2002 |  
|----------------------------------------------------------------------- | ---- |  | ---- | -------- | ---- | -
|                                                                        |      |  |      |          |      |  
|Cash Flows Provided (Used)                                              |      |  |      |          |      |  
|by Financing Activities                                                 |      | 
|Proceeds provided by stock issuance                                     |      | 
|under employee stock plans                                              |      |  |      | 3,843    |      |  
|Net change in credit facilities                                         |      |  |      | 4,122    |      |  
|Repayment of long-term debt, net                                        |      |  |      | (29,429  | )    |  
|Debt and other issuance costs                                           |      |  |      | (268     | )    |  
|Proceeds from note issuance                                             |      |  |      |         |      |  
|                                                                       
|                                                                        |      |  |      | (21,732  | )    |  
|                                                                       
|                                                                        |      |  |      |          |      |  
|Effect of foreign exchange rates on cash                                |      |  |      | 2,290    |      |  
|                                                                       
|                                                                        |      |  |      |          |      |  
|Net increase (decrease) in                                              |      | 
|cash and cash equivalents                                               |      |  |      | (101,884 | )    |  
|Cash and cash equivalents  beginning of year                           |      |  |      | 131,363  |      |  
|                                                                       
|Cash and cash equivalents  end of year                                 |      |  | $    | 29,479   |      | $
|                                                                       
|                                                                        |      |  |      |          |      |  
|Supplemental Cash Flow Information                                      |      | 
|Cash paid for interest                                                  |      |  | $    | 17,394   |      | $
|Cash paid (refunded) for taxes                                          |      |  |      | (1,909   | )    |  

See Notes to Consolidated Financial
Statements.

-31-

---

Consolidated Statement of
ShareholdersEquity and Comprehensive
Income

In Thousands, Except Per Share
Amounts

|For Each of the Three Fiscal Years
in the Period Ended October 29, 2004 | 2004 |  | 2003 |         | 2002 |  
|----------------------------------------------------------------------- | ---- |  | ---- | ------- | ---- | -
|                                                                        |      |  |      |         |      |  
|Common Stock, Par Value $.20 Per Share                                  |      |  |      |         |      |  
|Beginning of year                                                       |      |  | $    | 4,213   |      | $
|Shares issued under stock option plans                                  |      |  |      | 51      |      |  
|                                                                       
|End of year                                                             |      |  |      | 4,264   |      |  
|                                                                       
|                                                                        |      |  |      |         |      |  
|Additional Paid-in Capital                                              |      | 
|Beginning of year                                                       |      |  |      | 116,761 |      |  
|Shares issued under stock option plans                                  |      |  |      | 3,792   |      |  
|                                                                       
|End of year                                                             |      |  |      | 120,553 |      |  
|                                                                       
|                                                                        |      |  |      |         |      |  
|Retained Earnings                                                       |      | 
|Beginning of year                                                       |      |  |      | 266,600 |      |  
|Net earnings (loss)                                                     |      |  |      | 42,555  |      |  
|                                                                       
|End of year                                                             |      |  |      | 309,155 |      |  
|                                                                       
|                                                                        |      |  |      |         |      |  
|Accumulated Other Comprehensive Gain (Loss)                             |      | 
|Beginning of year                                                       |      |  |      | 6,298   |      |  
|Change in fair value of derivative                                      |      | 
|financial instruments, net of tax                                       |      |  |      | 581     |      |  
|Adjustment for supplemental executive                                   |      | 
|pension liability, net of tax                                           |      |  |      | (850    | )    |  
|Foreign currency translation adjustment                                 |      |  |      | 18,512  |      |  
|                                                                       
|End of year                                                             |      |  |      | 24,541  |      |  
|                                                                       
|Total Shareholders' Equity                                              |      |  | $    | 458,513 |      | $
|                                                                       
|                                                                        |      |  |      |         |      |  
|Comprehensive Income                                                    |      | 
|Net earnings (loss)                                                     |      |  | $    | 42,555  |      | $
|Change in fair value of derivative                                      |      | 
|financial instruments, net of tax                                       |      |  |      | 581     |      |  
|Adjustment for supplemental executive                                   |      | 
|pension liability, net of tax                                           |      |  |      | (850    | )    |  
|Foreign currency translation adjustment                                 |      |  |      | 18,512  |      |  
|                                                                       
|Comprehensive Income                                                    |      |  | $    | 60,798  |      | $
|                                                                       

See Notes to Consolidated
Financial Statements.

-32-

---

Notes to Consolidated
Financial Statements

# NOTE 1:  Accounting
Policies

Nature of OperationsEsterline Technologies Corporation
(the Company) designs, manufactures and markets highly engineered products. The Company
serves the aerospace and defense industry, primarily in the United States and Europe. The
Company also serves the industrial/commercial and medical markets.

Principles of Consolidation and Basis of PresentationThe consolidated financial statements
include the accounts of the Company and all subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Classifications have been changed for
certain amounts in prior periods to conform with the current years presentation. The
Companys fiscal year ends on the last Friday of October.

Management EstimatesTo prepare financial statements in
conformity with accounting principles generally accepted in the United States, management
is required to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue RecognitionThe Company recognizes revenue when
the title and risk of loss have passed to the customer, there is persuasive evidence of an
agreement, delivery has occurred or services have been rendered, the price is
determinable, and the collectibility is reasonably assured. The Company recognizes product
revenues at the point of shipment or delivery in accordance with the terms of sale. Sales
are net of returns and allowances. Returns and allowances are not significant because
products are manufactured to customer specification and are covered by the terms of the
product warranty.

# Financial Instruments

Fair Value of Financial InstrumentsThe Companys financial instruments
consist primarily of cash and cash equivalents, accounts receivable, accounts payable,
short-term borrowings, long-term debt, foreign currency forward contracts, and an interest
rate swap agreement. The carrying amounts of cash and cash equivalents, accounts
receivable, and accounts payable approximate their respective fair values because of the
short-term maturities or expected settlement dates of these instruments. The fair market
value of the Companys long-term debt and short-term borrowings was estimated

-33-

---

at $271.1 million and $294.9 million, at fiscal year end 2004 and 2003,
respectively. These estimates were derived using discounted cash flows with interest rates
currently available to the Company for issuance of debt with similar terms and remaining
maturities.

Foreign Currency Exchange Risk ManagementThe Company is subject to risks
associated with fluctuations in foreign currency exchange rates from the sale of products
in currencies other than its functional currency. The Companys policy is to hedge a
portion of its forecasted transactions using forward exchange contracts, with maturities
up to fifteen months. These forward contracts have been designated as cash flow hedges.
The portion of the net gain or loss on a derivative instrument that is effective as a
hedge is reported as a component of other comprehensive income in shareholders
equity and is reclassified into earnings in the same period during which the hedged
transaction affects earnings. The remaining net gain or loss on the derivative in excess
of the present value of the expected cash flows of the hedged transaction is recorded in
earnings immediately. If a derivative does not qualify for hedge accounting, or a portion
of the hedge is deemed ineffective, the change in fair value is recorded in earnings. The
amount of hedge ineffectiveness has not been material in any of the three fiscal years in the period ended October 29, 2004.
At October 29, 2004 and
October 31, 2003, the notional value of foreign currency forward contracts was
$26.5 million and $11.1 million, respectively. The fair value of these contracts
at October 29, 2004 and October 31, 2003 was an asset of $1,096,000 and $173,000,
respectively. The Company does not enter into any forward contracts for trading purposes.

Interest Rate Risk ManagementDepending on the interest rate
environment, the Company may enter into interest rate swap agreements to convert the fixed
interest rates on notes payable to variable interest rates or terminate any swap
agreements in place. These interest rate swap agreements have been designated as fair
value hedges. Accordingly, gain or loss on swap agreements as well as the offsetting loss
or gain on the hedged portion of notes payable are recognized in interest expense during
the period of the change in fair values. The Company attempts to manage exposure to
counterparty credit risk by only entering into agreements with major financial
institutions which are expected to be able to fully perform under the terms of the
agreement. In September 2003, the Company entered into an interest rate swap agreement on
$75.0 million of its Senior Subordinated Notes due in 2013. The swap agreement
exchanged the fixed interest rate for a variable interest rate on $75.0 million of
the $175.0 million principal amount outstanding. The fair market value of the
Companys interest rate swap was a $1,769,000 asset and a $235,000 liability at
October 29, 2004 and October 31, 2003, respectively. The fair market value was
estimated by discounting expected cash flows using quoted market interest rates.

Foreign Currency TranslationForeign currency assets and
liabilities are translated into their U.S. dollar equivalents based on year-end exchange
rates. Revenue and expense accounts are translated at average exchange

-34-

---

rates. Aggregate
exchange gains and losses arising from the translation of foreign assets and liabilities
are included in shareholders equity as a component of comprehensive income. Foreign
currency transaction gains and losses are included in results of operations and have not
been significant in amount in any of the three fiscal years in the period ended
October 29, 2004.

Cash Equivalents and Cash in EscrowCash equivalents consist of highly
liquid investments with maturities of three months or less at the date of purchase. Fair
value of cash equivalents approximates carrying value. Cash in escrow represents amounts
held in escrow pending finalization of a purchase transaction.

Short-term InvestmentsShort-term investments consist of
highly liquid investments with maturities of more than three months at the date of
purchase. Short-term investments are classified as trading securities and, accordingly, are
reported at fair value with unrealized gains and losses included in earnings.

Accounts ReceivableAccounts receivable are recorded at
the net invoice price for sales billed to customers. Accounts receivable are considered
past due when outstanding more than normal trade terms allow. An allowance for doubtful
accounts is established when losses are expected to be incurred. Accounts receivable are
written off to the allowance for doubtful accounts when the balance is considered to be
uncollectible.

InventoriesInventories are stated at the lower
of cost or market using the first-in, first-out (FIFO) or average cost method. Inventory
cost includes material, labor and factory overhead.

Property, Plant and Equipment, and DepreciationProperty, plant and equipment is
carried at cost and includes expenditures for major improvements. Depreciation is
generally provided on the straight-line method based upon estimated useful lives ranging
from 3 to 30 years. Depreciation expense was $21,609,000, $17,510,000 and $13,106,000 for
fiscal years 2004, 2003 and 2002, respectively.

Debt Issuance CostsCosts incurred to issue debt are
deferred and amortized as interest expense over the term of the related debt using a
method that approximates the effective interest method.

-35-

---

Long-lived AssetsThe carrying amount of long-lived
assets is reviewed periodically for impairment. An asset (other than goodwill and
indefinite lived intangible assets) is considered impaired when estimated future cash
flows are less than the carrying amount of the asset. In the event the carrying amount of
such asset is not deemed recoverable, the asset is adjusted to its estimated fair value.
Fair value is generally determined based upon estimated discounted future cash flows.

Goodwill and IntangiblesBeginning in fiscal 2002 with the
adoption of Statement No. 142, goodwill is no longer amortized, but instead tested
for impairment at least annually. When a reporting units carrying value exceeds its
estimated fair value, an impairment test is required. This test involves allocating the
fair value of the reporting unit to all of the assets and liabilities of that unit, with
the excess of fair value over allocated net assets representing the fair value of
goodwill. An impairment loss is measured as the amount by which the carrying value of
goodwill exceeds the estimated fair value of goodwill. Prior to fiscal 2002, goodwill was
amortized on a straight-line basis over the period of expected benefit which ranged from
10 to 40 years.

Intangible assets are amortized using
the straight-line method over their estimated period of benefit, ranging from 2 to 20
years. The Company periodically evaluates the recoverability of intangible assets and
takes into account events or circumstances that warrant revised estimates of useful lives
or that indicate that an impairment exists.

Indefinite lived intangible assets
(other than goodwill) are tested annually for impairment or more frequently on an interim
basis if circumstances require. This test is comparable to the impairment test for
goodwill described above.

EnvironmentalEnvironmental exposures are provided
for at the time they are known to exist or are considered probable and reasonably
estimable. No provision has been recorded for environmental remediation costs which could
result from changes in laws or other circumstances currently not contemplated by the
Company. Costs provided for future expenditures on environmental remediation are not
discounted to present value.

Stock-based CompensationThe Company accounts for its
stock-based compensation plans in accordance with Accounting Principles Board Opinion
No. 25. Additional disclosures as required under Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation (Statement
No. 132), are included below. The Black-Scholes option-pricing model was used to
calculate the estimated compensation expense that would have been recognized under these
guidelines.

-36-

---

As prescribed by Statement
No. 123, including compensation cost for the Companys stock option and employee
stock purchase plans, pro forma disclosures for fiscal years 2004, 2003 and 2002 would
have been:

In Thousands, Except Per
Share Amounts

|                                              | 2004 |  | 2003 |        | 2002 |  
|--------------------------------------------- | ---- |  | ---- | ------ | ---- | -
|                                              |      |  |      |        |      |  
|Net earnings (loss) as reported               |      |  | $    | 42,555 |      | $
|Pro forma net earnings (loss)                 |      |  |      | 40,566 |      |  
|                                              |      |  |      |        |      |  
|Basic earnings (loss) per share as reported   |      |  | $    | 2.01   |      | $
|Pro forma basic earnings (loss) per share     |      |  |      | 1.91   |      |  
|                                              |      |  |      |        |      |  
|Diluted earnings (loss) per share as reported |      |  | $    | 1.98   |      | $
|Pro forma diluted earnings (loss) per share   |      |  |      | 1.88   |      |  
|                                             

The weighted average Black-Scholes
value of options granted during fiscal years 2004, 2003 and 2002 was $13.85, $11.96 and
$11.26, respectively. The assumptions used in the Black-Scholes option-pricing model for
fiscal years 2004, 2003 and 2002 were as follows:

|                        | 2004 |  | 2003 |             | 2002 | 
|----------------------- | ---- |  | ---- | ----------- | ---- | 
|                        |      |  |      |             |      | 
|Volatility              |      |  |      | 53.1        | %    | 
|Risk-free interest rate |      |  |      | 3.12 - 3.84 | %    | 
|Expected life (years)   |      |  |      | 5 - 8       |      | 
|Dividends               |      |  |      |            |      | 
|                       

Product WarrantiesEstimated product warranty expenses
are recorded when the covered products are shipped to customers and recognized as revenue.
Product warranty expense is estimated based upon the terms of the warranty program.

Earnings Per ShareBasic earnings per share is computed
on the basis of the weighted average number of common shares outstanding during the year.
Diluted earnings per share also includes the dilutive effect of stock options. The
weighted average number of shares outstanding used to compute basic earnings per share was
21,195,000, 20,900,000 and 20,751,000 for the fiscal years 2004, 2003 and 2002,
respectively. The weighted average number of shares outstanding used to compute diluted
earnings per share was 21,539,000, 21,105,000 and 21,021,000 for the fiscal years 2004,
2003 and 2002, respectively.

-37-

---

Recent Accounting PronouncementsIn December 2004, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards No. 123R, Share-Based Payment, which is
effective for public companies for interim or annual periods beginning after June 15, 2005. This statement will have a
significant impact on the Companys consolidated statements of operations, as the Company will be required to expense the
fair value of its stock option grants and stock purchases under its employee stock purchase plan rather than disclose the impact
on the consolidated net income within the footnotes as is the Companys current practice. Management intends to comply with the
standard upon its effectiveness; however, management does not believe that the impact would be materially different from the
above pro forma disclosures under Stock-Based Compensation.

-38-

---

# NOTE 2:  Accounting
Changes

Effective at the beginning of fiscal
2002, the Company adopted Statement No. 142. Under the new Statement, goodwill and
intangible assets deemed to have indefinite lives are no longer amortized, but are subject
to annual impairment tests in accordance with the Statement. The Company conducted its
initial impairment tests and determined that goodwill associated with a reporting unit in
the Avionics & Controls segment was impaired as a result of applying Statement
No. 142. Due to increased competition in the electronic input industry, principally
from companies headquartered in Asia, operating profits and cash flows were lower in
fiscal 2001 for this reporting unit. Based upon this trend, the earnings forecast for the
next five years was lowered. A goodwill impairment loss of $7,574,000, net of an income
tax benefit of $1,542,000, or ($.36) per diluted share, was recognized and reported as a
cumulative effect of a change in accounting principle upon the adoption of Statement
No. 142 in the first quarter of fiscal 2002. The fair value of the affected reporting
unit was estimated using a combination of the present value of expected cash flows and a
market approach.

-39-

---

# NOTE 3:  Discontinued
Operations

On July 25, 2002, the Board
of Directors adopted a formal plan for the sale of the assets and operations of the
Companys Automation segment. As a result, the consolidated financial statements
present the Automation segment as a discontinued operation. The Company recorded an
after-tax loss from discontinued operations of $5.8 million and $25.0 million in
fiscal 2003 and 2002, respectively. On July 23, 2003, the Company sold the assets of
its Excellon Automation subsidiary. On August 31, 2004, the Company sold the stock of
W. A. Whitney for $10.0 million in cash. Upon the final disposition of its
discontinued operations, the Company recorded an $8.0 million gain, net of
$4.5 million in tax, including the reversal of estimated reserves, which were
recognizable upon the sale of the business.

Sales of the Automation segment were
$16,892,000, $22,942,000 and $32,896,000 in fiscal years 2004, 2003 and 2002,
respectively. The operating results of the discontinued segment for fiscal years 2004,
2003 and 2002 consist of the following:

In Thousands

|                                           | 2004 |  | 2003 |       | 2002 |  
|------------------------------------------ | ---- |  | ---- | ----- | ---- | -
|                                           |      |  |      |       |      |  
|Income (loss) before taxes                 |      |  | $    | 1,824 |      | $
|Tax expense (benefit)                      |      |  |      | 657   |      |  
|                                          
|Net income (loss)                          |      |  |      | 1,167 |      |  
|Gain (loss) on disposal,                   |      | 
|including tax expense (benefit)            |      | 
|of $4,507, $(3,474) and $(7,951)           |      |  |      | 8,014 |      |  
|                                          
|Income (loss) from discontinued operations |      |  | $    | 9,181 |      | $
|                                          

-40-

---

# NOTE 4:  Inventories

Inventories at the end of fiscal 2004
and 2003 consisted of the following:

In Thousands

|                                  | 2004 |  | 2003 |        
|--------------------------------- | ---- |  | ---- | -------
|                                  |      |  |      |        
|Raw materials and purchased parts |      |  | $    | 58,736 
|Work in process                   |      |  |      | 43,326 
|Finished goods                    |      |  |      | 16,992 
|                                 
|                                  |      |  | $    | 119,054
|                                 

-41-

---

# NOTE 5:  Goodwill

The following table summarizes the
changes in goodwill by segment for fiscal 2004 and 2003:

In Thousands

|                                        | Avionics &
Controls |  | Sensors &
Systems |        | Advanced
Materials |   | Total  | 
|--------------------------------------- | ------------------- |  | ----------------- | ------ | ------------------ | - | ------ | 
|Balance, October 25, 2002               |                     |  | $                 | 56,711 |                    | $ | 18,376 | 
|Goodwill from acquisitions              |                     |  |                   |       |                    |   | 24,698 | 
|Purchase price allocation adjustment    |                     |  |                   | 477    |                    |   |       | 
|Foreign currency translation adjustment |                     |  |                   | 420    |                    |   | 1,306  | 
|                                       
|                                        |                     |  |                   |        |                    |   |        | 
|Balance, October 31, 2003               |                     |  | $                 | 57,608 |                    | $ | 44,380 | 
|Goodwill from acquisitions              |                     |  |                   | 20,505 |                    |   | 38,997 | 
|Foreign currency translation adjustment |                     |  |                   |       |                    |   | 2,862  | 
|                                       
|Balance, October 29, 2004               |                     |  | $                 | 78,113 |                    | $ | 86,239 | 
|                                       

The $923,000 purchase price
allocation adjustment in 2003 resulted from the finalization of the asset valuation and
additional acquisition costs directly related to the purchase of Janco Corporation and the
Electronic Warfare Passive Expendables Division of BAE SYSTEMS North America (BAE Systems)
radar countermeasures chaff and infrared decoy flare operations.

-42-

---

# NOTE 6:  Intangible
Assets

Intangible assets at the end of
fiscal 2004 and 2003 were as follows:

In Thousands

|                                   |  | 2004 |  | 2003 | 
|---------------------------------- |  | ---- |  | ---- | 
|
|Amortized Intangible Assets        |  |      |  |      | 
|Programs                           |  |      |  | 18   | 
|Core technology                    |  |      |  | 16   | 
|Patents and other                  |  |      |  | 7    | 
|                                  
|Total                              |  |      |  |      | 
|                                  
|                                   |  |      |  |      | 
|Indefinite-lived Intangible Assets |  |     
|Trademark                          |  |      |  |      | 
|                                  
|                                   |  |     

Amortization of intangible assets was $8,533,000, $6,248,000 and $1,522,000 in fiscal years 2004, 2003 and 2002,
respectively.

Estimated amortization expense related to intangible assets for each of the next five fiscal years is as follows:

In Thousands

|Fiscal Year | 
|----------- | 
|2005        | 
|2006        | 
|2007        | 
|2008        | 
|2009        | 

-43-

---

# NOTE 7:  Accrued
Liabilities

Accrued liabilities at the end of
fiscal 2004 and 2003 consisted of the following:

In Thousands

|                               | 2004 |  | 2003 |       
|------------------------------ | ---- |  | ---- | ------
|                               |      |  |      |       
|Payroll and other compensation |      |  | $    | 39,316
|Casualty and medical           |      |  |      | 11,940
|Interest                       |      |  |      | 6,338 
|Warranties                     |      |  |      | 6,633 
|State and other tax accruals   |      |  |      | 9,001 
|Acquisition related payments   |      |  |      | 8,510 
|Other                          |      |  |      | 15,300
|                              
|                               |      |  | $    | 97,038
|                              

# NOTE 8:  Other
Liabilities

Other liabilities at the end of
fiscal 2004 and 2003 consisted of the following:

In Thousands

|                             | 2004 |  | 2003 |       
|---------------------------- | ---- |  | ---- | ------
|                             |      |  |      |       
|Pension obligation           |      |  | $    | 24,852
|Acquisition related payments |      |  |      | 5,000 
|                            
|                             |      |  | $    | 29,852
|                            

-44-

---

# NOTE 9:  Retirement
Benefits

Pension benefits are provided for
approximately 50% of all U.S. employees under the Esterline contributory pension plan or the
Leach noncontributory defined benefit pension plan.

Under the Esterline plan, pension
benefits are based on years of service and five-year average compensation or under a cash balance formula,
with annual pay credits ranging from 2% to 6% of salary. Esterline amended its defined benefit plan to add the cash balance
formula effective January 1, 2003. Participants elected either to continue earning
benefits under the current plan formula or to earn benefits under the cash balance
formula. Effective January 1, 2003, all new participants are enrolled in the cash
balance formula.  Esterline also has an unfunded supplemental retirement plan for key executives providing for periodic
payments upon retirement.

Under the Leach noncontributory
defined benefit pension plan, benefits are based on an employees years of service
and the highest five consecutive years compensation during the last ten years of
employment. Leachs non-U.S. subsidiaries have retirement plans covering
substantially all of its employees. Benefits become vested after ten years of employment
and are due in full upon retirement, disability or death of the employee. Leach also has a
supplemental retirement plan which provides supplemental pension benefits to key
management in addition to amounts received under the Companys existing retirement
plan.

The Company accounts for pension
expense using the end of the fiscal year as its measurement date. In addition, the Company
makes actuarially computed contributions to these plans as necessary to adequately fund
benefits. The Companys funding policy is consistent with the minimum funding
requirements of ERISA. The Esterline plan will require no contributions in fiscal 2005.
Effective December 2003, the Leach plan was frozen and employees no longer accrue benefits
for future services. The accumulated benefit obligation and projected benefit obligation
for the Leach plans are $40,406,000 and $40,520,000, respectively, with plan assets of
$19,562,000 as of October 29, 2004. The accrued benefit liabilities for these Leach
plans are $20,992,000 at October 29, 2004. Contributions to the Leach plans totaled
$523,000 in fiscal 2004 and will be in the range of $2,400,000 to $2,800,000 in fiscal
2005.

|                                                | 2004 |  | 2003 |     
|----------------------------------------------- | ---- |  | ---- | ----
|Principal assumptions as of fiscal year end:    |      |  |      |     
|Discount Rate                                   |      |  |      | 6.0%
|Rate of increase in future compensation levels  |      |  |      | 4.5%
|Assumed long-term rate of return on plan assets |      |  |      | 8.5%

Plan assets are invested in a
diversified portfolio of equity and debt securities, consisting primarily of common
stocks, bonds and government securities. The objective of these investments is to maintain
sufficient liquidity to fund current benefit payments and achieve targeted risk-adjusted
returns. Management periodically reviews allocations of plan assets by investment type
and evaluates external sources of information regarding the long-term historical returns
and expected future returns for each investment type and, accordingly, believes an 8.5%

-45-

---

assumed
long-term rate of return on plan assets is appropriate. Allocations by investment
type are as follows:

|                  |  | Actual | 
|----------------- |  | ------ | 
|
|                  |  |        | 
|Equity securities |  |        | 
|Debt securities   |  |        | 
|                 
|Total             |  |        | 

Net periodic pension cost for the
Companys defined benefit plans at the end of each fiscal year consisted of the
following:

In Thousands

|                                   | 2004 |  | 2003 |        | 2002 |  
|---------------------------------- | ---- |  | ---- | ------ | ---- | -
|Components of Net Periodic Cost    |      |  |      |        |      |  
|Service cost                       |      |  | $    | 3,838  |      | $
|Interest cost                      |      |  |      | 7,618  |      |  
|Expected return on plan assets     |      |  |      | (9,766 | )    |  
|Amortization of transition asset   |      |  |      |       |      |  
|Amortization of prior service cost |      |  |      | 19     |      |  
|Amortization of actuarial loss     |      |  |      | 468    |      |  
|                                  
|Net periodic cost                  |      |  | $    | 2,177  |      | $
|                                  

-46-

---

The funded status of the defined benefit pension plans at the end of fiscal 2004 and 2003 were as follows:

In Thousands

|                                                           | 2004 |  | 2003 |        
|---------------------------------------------------------- | ---- |  | ---- | -------
|Benefit Obligation                                         |      |  |      |        
|Beginning balance                                          |      |  | $    | 114,196
|Service cost                                               |      |  |      | 3,838  
|Interest cost                                              |      |  |      | 7,620  
|Actuarial loss                                             |      |  |      | 7,300  
|Acquisitions                                               |      |  |      | 40,542 
|Amendments                                                 |      |  |      |       
|Benefits paid                                              |      |  |      | (7,168 
|                                                          
|Ending balance                                             |      |  | $    | 166,328
|                                                          
|                                                           |      |  |      |        
|Plan Assets  Fair Value                                   |      | 
|Beginning balance                                          |      |  | $    | 115,202
|Actual gain on plan assets                                 |      |  |      | 14,577 
|Acquisitions                                               |      |  |      | 19,141 
|Company contributions                                      |      |  |      | 559    
|Benefits paid                                              |      |  |      | (7,168 
|                                                          
|Ending balance                                             |      |  | $    | 142,311
|                                                          
|                                                           |      |  |      |        
|Reconciliation of Funded Status to Net Amount Recognized   |      | 
|Funded status  plan assets relative to benefit obligation |      |  | $    | (24,017
|Unrecognized net actuarial loss                            |      |  |      | 17,910 
|Unrecognized prior service costs (benefit)                 |      |  |      | (12    
|Unrecognized net loss                                      |      |  |      | (31    
|                                                          
|Net amount recognized                                      |      |  | $    | (6,150 
|                                                          
|                                                           |      |  |      |        
|Amount Recognized in the Consolidated Balance Sheet        |      | 
|Prepaid benefit cost                                       |      |  | $    | 17,647 
|Accrued benefit liability                                  |      |  |      | (25,277
|Intangible assets                                          |      |  |      | 141    
|Accumulated other comprehensive income                     |      |  |      | 1,339  
|                                                          
|Net amount recognized                                      |      |  | $    | (6,150 
|                                                          

The accumulated benefit obligation
for all pension plans was $159,689,514 at October 29, 2004 and $105,795,633 at
October 31, 2003.

-47-

---

Estimated future benefit payments
expected to be paid from the plan or from our assets are as follows:

In Thousands

|          | 
|--------- | 
|2005      | 
|2006      | 
|2007      | 
|2008      | 
|2009      | 
|2010-2014 | 

Employees may participate in certain
defined contribution plans. The Companys contribution expense under these plans
totaled $5,796,000, $4,790,000 and $3,227,000 in fiscal 2004, 2003 and 2002, respectively.

-48-

---

# NOTE 10:  Income
Taxes

Income tax expense from continuing
operations for each of the fiscal years consisted of:

In Thousands

|                   | 2004 |  | 2003 |        | 2002 |  
|------------------ | ---- |  | ---- | ------ | ---- | -
|Current            |      |  |      |        |      |  
|U.S. Federal       |      |  | $    | 9,250  |      | $
|State              |      |  |      | 1,000  |      |  
|Foreign            |      |  |      | 284    |      |  
|                  
|                   |      |  |      | 10,534 |      |  
|Deferred           |      | 
|U.S. Federal       |      |  |      | 4,010  |      |  
|State              |      |  |      | 860    |      |  
|Foreign            |      |  |      | (4,079 | )    |  
|                  
|                   |      |  |      | 791    |      |  
|                  
|Income tax expense |      |  | $    | 11,325 |      | $
|                  

U.S. and foreign components of income from continuing operations before income taxes
          for each of the fiscal years were:

In Thousands

|                                   | 2004 |  | 2003 |        | 2002 |  
|---------------------------------- | ---- |  | ---- | ------ | ---- | -
|                                   |      |  |      |        |      |  
|U.S.                               |      |  | $    | 37,639 |      | $
|Foreign                            |      |  |      | 7,082  |      |  
|                                  
|Income from continuing operations, |      | 
|before income taxes                |      |  | $    | 44,721 |      | $
|                                  

Primary components of the
Companys deferred tax assets (liabilities) at the end of the fiscal year resulted
from temporary tax differences associated with the following:

In Thousands

|                               | 2004 |  | 2003 |        
|------------------------------ | ---- |  | ---- | -------
|                               |      |  |      |        
|Reserves and liabilities       |      |  | $    | 14,783 
|NOL carryforwards              |      |  |      | 13,677 
|Employee benefits              |      |  |      | 3,740  
|Other                          |      |  |      | 1,158  
|                              
|Total deferred tax assets      |      |  |      | 33,358 
|                               |      |  |      |        
|Depreciation and amortization  |      |  |      | (27,094
|Intangibles and amortization   |      |  |      | (13,067
|Retirement benefits            |      |  |      | (4,440 
|Other                          |      |  |      |       
|                              
|Total deferred tax liabilities |      |  |      | (44,601
|                              
|Net deferred tax liabilities   |      |  | $    | (11,243
|                              

-49-

---

In connection with the Leach
acquisition, the Company assumed a U.S. net operating loss (NOL) of $38.6 million
which can be carried forward to subsequent years, subject to limitations under Internal
Revenue Code Section 382. Approximately $2.5 million of the $13.7 million
tax benefit associated with the NOL carryforward is included in current deferred income
tax benefits, and $11.2 million is reported as non-current deferred income tax
benefits, reflecting the amount of the NOL that is expected to be utilized in fiscal years
ending after October 2005. The NOL expires beginning in 2022.

The tax benefit received by the
Company upon exercise of non-qualified employee stock options was $2.9 million,
$0.9 million and $0.5 million in fiscal 2004, 2003 and 2002, respectively.

No valuation allowance was considered
necessary on deferred tax assets.

A reconciliation of the U.S. federal
statutory income tax rate to the effective income tax rate for each of the fiscal years
was as follows:

|                               | 2004 |  | 2003 |      | 2002 | 
|------------------------------ | ---- |  | ---- | ---- | ---- | 
|                               |      |  |      |      |      | 
|U.S. statutory income tax rate |      |  |      | 35.0 | %    | 
|State income taxes             |      |  |      | 1.5  |      | 
|Foreign taxes                  |      |  |      | (5.0 | )    | 
|Export sales benefit           |      |  |      | (1.5 | )    | 
|Pass-through entities          |      |  |      | 6.0  |      | 
|Foreign tax credits            |      |  |      | (5.7 | )    | 
|Research & development credits |      |  |      | (8.0 | )    | 
|Tax accrual adjustment         |      |  |      | 2.1  |      | 
|Other, net                     |      |  |      | 0.9  |      | 
|                              
|Effective income tax rate      |      |  |      | 25.3 | %    | 
|                              

The effective tax rate differed from
the statutory rate in fiscal 2004, 2003 and 2002, as all years benefited from various tax
credits and export sales incentives. In fiscal 2004 and 2002, the Company recognized a
$1.9 million and $2.9 million reduction in income taxes, respectively,
associated with the favorable resolution of ongoing income tax audits.

No provision for federal income taxes
has been made on accumulated earnings of foreign subsidiaries, since such earnings are
considered indefinitely reinvested.

-50-

---

# NOTE 11:  Debt

Long-term debt at the end of fiscal
2004 and 2003 consisted of the following:

In Thousands

|                                               | 2004 |  | 2003 |        
|---------------------------------------------- | ---- |  | ---- | -------
|                                               |      |  |      |        
|7.75% Senior Subordinated Notes, due June 2013 |      |  | $    | 175,000
|6.77% Senior Notes, due November 2008          |      |  |      | 40,000 
|6.40% Senior Notes, due November 2005          |      |  |      | 30,000 
|6.00% Senior Notes, due November 2003          |      |  |      |       
|Other                                          |      |  |      | 3,318  
|                                              
|                                               |      |  |      | 248,318
|                                               |      |  |      |        
|Fair value of interest rate swap agreement     |      |  |      | 1,769  
|Less current maturities                        |      |  |      | 1,031  
|                                              
|Carrying amount of long-term debt              |      |  | $    | 249,056
|                                              

In June 2003, the Company sold
$175.0 million of 7.75% Senior Subordinated Notes due in 2013 and requiring
semi-annual interest payments in December and June of each year until maturity. The net
proceeds from this offering were used to acquire the Weston Group from The Roxboro
Group PLC for U.K. £55.0 million in cash (approximately $94.6 million
based on the closing exchange rate and including acquisition costs) and for general
corporate purposes, including the repayment of debt and possible future acquisitions. The
Senior Subordinated Notes are general unsecured obligations of the Company and are
subordinated to all existing and future senior debt of the Company. In addition, the
Senior Subordinated Notes are effectively subordinated to all existing and future senior
debt and other liabilities (including trade payables) of the Companys foreign
subsidiaries. The Senior Subordinated Notes are guaranteed, jointly and severally, by all
the existing and future domestic subsidiaries of the Company unless designated as an
unrestricted subsidiary under the indenture covering the Senior Subordinated
Notes. The Senior Subordinated Notes are subject to redemption at the option of the
Company, in whole or in part, on or after June 28, 2008 at redemption prices
starting at 103.875% of the principal amount plus accrued interest during the period
beginning June 28, 2003 and declining annually to 100% of principal and accrued
interest on June 15, 2011. Any time prior to June 15, 2006, the
Company may redeem up to 35% of the aggregate principal amount of the Senior Subordinated
Notes with the proceeds of one or more public equity offerings at a redemption price of
107.75% of the principal amount plus accrued interest.

In September 2003, the Company
entered into an interest rate swap agreement on $75.0 million of its Senior
Subordinated Notes due in 2013. The swap agreement exchanged the fixed interest rate for a
variable interest rate on $75.0 million of the $175.0 million principal amount
outstanding. The variable interest rate is based upon LIBOR plus 2.56% and was 4.87% at
October 29, 2004. The fair market value of the Companys interest rate swap was
a $1,769,000 asset at October 29, 2004 and was estimated by discounting expected
cash flows using quoted market interest rates.

-51-

---

The Senior Notes due in fiscal years
2006 and 2009 require semi-annual interest payments in November and May of each
year. The Senior Notes are unsecured.

Maturities of long-term debt at
October 29, 2004, were as follows:

In Thousands

|Fiscal Year         | 
|------------------- | 
|2005                | 
|2006                | 
|2007                | 
|2008                | 
|2009                | 
|2010 and thereafter | 
|                   
|                    | 
|                   

Short-term credit facilities at the
end of fiscal 2004 and 2003 consisted of the following:

In Thousands

|        | 2004 |  | 2003
|------- | ---- |  | ----
|
|        |      |  |     
|U.S.    |      |  | $   
|Foreign |      |  |     
|       
|        |      |  | $   
|       

The Companys primary U.S. dollar credit facility totals $60,000,000 and is made available through a group of
banks.  The credit agreement is secured by substantially all of the Companys assets and interest is based on
standard inter-bank offering rates.  An additional $15,254,000 of unsecured foreign currency credit facilities have
been extended by foreign banks for a total of $75,254,000 available companywide.

A number of underlying agreements contain various covenant restrictions which include maintenance of net worth, payment
of dividends, interest coverage and limitations on additional borrowings.  The Company was in compliance with these
covenants at October 29, 2004.  Available credit under the above credit facilities was $59,955,000 at fiscal 2004
year end, when reduced by outstanding borrowings of $6,977,000 and letters of credit of $8,322,000.

The fair market value of the Companys long-term debt and short-term borrowings was estimated at $271,069,000 and
$294,889,000 at fiscal year end 2004 and 2003, respectively.  These estimates were derived using discounted cash
flows with interest rates currently available to the Company for issuance of debt with similar terms and remaining
maturities.

-52-

---

# NOTE 12:  Commitments and Contingencies

Rental expense for operating leases totaled $9,482,000, $7,961,000 and $6,493,000 in fiscal years 2004, 2003 and
2002, respectively.

At October 29, 2004, the Companys rental commitments for noncancelable operating leases with a duration in excess
of one year were as follows:

In Thousands

|Fiscal Year         | 
|------------------- | 
|2005                | 
|2006                | 
|2007                | 
|2008                | 
|2009                | 
|2010 and thereafter | 
|                   
|                    | 
|                   

The Company is a party to various
lawsuits and claims, both as plaintiff and defendant, and has contingent liabilities
arising from the conduct of business, none of which, in the opinion of management, is
expected to have a material effect on the Companys financial position or results of
operations. The Company believes that it has made appropriate and adequate provisions for
contingent liabilities.

Approximately 670 U.S.-based
employees or 17% of total U.S.-based employees were represented by various labor unions. In October 2004,
a collective bargaining agreement covering about 250 employees expired and a successor agreement was
reached with the labor union. Additionally, a collective bargaining agreement covering about 100
employees is currently being negotiated, and a third agreement covering about 100 employees
will expire in April 2005. Management believes that the Company has established a good relationship with these
employees and their union. The Companys European operations are subject to national
trade union agreements and to local regulations governing employment.

-53-

---

# NOTE 13:  Employee
Stock Plans

In March 2002, the Companys
shareholders approved the establishment of an Employee Stock Purchase Plan (ESPP) under
which 300,000 shares of the Companys common stock are reserved for issuance to
employees. The plan qualifies as a noncompensatory employee stock purchase plan under
Section 423 of the Internal Revenue Code. Employees are eligible to participate
through payroll deductions subject to certain limitations.

At the end of each offering period,
usually six months, shares are purchased by the participants at 85% of the lower of the
fair market value on the first day of the offering period or the purchase date. During
fiscal 2004, employees purchased 58,861 shares at a fair market value price of $22.23 per
share, leaving a balance of 186,187 shares available for issuance in the future. As of
October 29, 2004, deductions aggregating $553,724 were accrued for the purchase
of shares on December 15, 2004.

The Company also provides a
nonqualified stock option plan for officers and key employees. At the end of
fiscal 2004, the Company had 2,013,250 shares reserved for issuance to officers and
key employees, of which 575,250 shares were available to be granted in the future.

The Board of Directors authorized the
Compensation Committee to administer option grants and their terms. Awards under the 2004
plan may be granted to eligible employees of the Company over the 10-year period ending
March 3, 2014. Options granted become exercisable over a period of four years
following the date of grant and expire on the tenth anniversary of the grant. Option
exercise prices are equal to the fair market value of the Companys common stock on
the date of grant.

The following table summarizes the
changes in outstanding options granted under the Companys stock option plans:

|                  | 2004 |  | 2003 |           | 2002 |  
|----------------- | ---- |  | ---- | --------- | ---- | -
|
|Outstanding,      |      |  |      |           |      |  
|beginning of year |      |  |      | 1,497,750 |      | $
|Granted           |      |  |      | 229,000   |      |  
|Exercised         |      |  |      | (278,250  | )    |  
|Cancelled         |      |  |      | (10,500   | )    |  
|                 
|Outstanding,      |      | 
|end of year       |      |  |      | 1,438,000 |      | $
|                 
|Exercisable,      |      | 
|end of year       |      |  |      | 877,750   |      | $
|                 

-54-

---

The following table summarizes
information for stock options outstanding at October 29, 2004:

|                          |  | Options Outstanding |  | Options Exercisable | 
|------------------------- |  | ------------------- |  | ------------------- | 
|
|                          |  |                     |  |                     | 
|$      6.44        11.69 |  |                     |  | 242,000             | 
|13.25        16.75       |  |                     |  | 285,500             | 
|17.90        19.63       |  |                     |  | 308,250             | 
|19.65        22.31       |  |                     |  | 289,500             | 
|22.60        29.00       |  |                     |  | 312,750             | 
|                         

-55-

---

# NOTE 14:  Capital
Stock

The authorized capital stock of the
Company consists of 25,000 shares of preferred stock ($100 par value), 475,000 shares of
serial preferred stock ($1.00 par value), each issuable in series, and 60,000,000 shares
of common stock ($.20 par value). At the end of fiscal 2004, there were no shares of
preferred stock or serial preferred stock outstanding.

On November 24, 2004 the
Company completed a public offering of 3.7 million shares of common stock, including
shares sold under the underwriters over-allotment option, priced at $31.25 per
share, generating net proceeds of approximately $109 million, of which
$5.0 million was used to pay off existing credit facilities. The funds provide
additional financial resources for acquisitions and general corporate
purposes.

Effective December 5, 2002,
the Board of Directors adopted a Shareholder Rights Plan, providing for the distribution
of one Series B Serial Preferred Stock Purchase Right (Right) for each share of
common stock held as of December 23, 2002. Each Right entitles the holder to
purchase one one-hundredth of a share of Series B Serial Preferred Stock at an
exercise price of $161.00, as may be adjusted from time to time.

The Right to purchase shares of
Series B Serial Preferred Stock is triggered once a person or entity (together with
such persons or entitys affiliates) beneficially owns 15% or more of the
outstanding shares of common stock of the Company (such person or entity, an Acquiring
Person). When the Right is triggered, the holder may purchase one one-hundredth of a share
of Series B Serial Preferred Stock at an exercise price of $161.00 per share. If
after the Rights are triggered, (i) the Company is the surviving corporation in a
merger or similar transaction with an Acquiring Person, (ii) the Acquiring Person
beneficially owns more than 15% of the outstanding shares of common stock or
(iii) the Acquiring Person engages in other self-dealing transactions,
holders of the Rights can elect to purchase shares of common stock of the Company with a
market value of twice the exercise price. Similarly, if after the Rights are triggered,
the Company is not the surviving corporation of a merger or similar transaction or the
Company sells 50% or more of its assets to another person or entity, holders of the Rights
may elect to purchase shares of common stock of the surviving corporation or that person
or entity who purchased the Companys assets with a market value of twice the
exercise price.

-56-

---

# NOTE 15:  Acquisitions
and Divestitures

AcquistionsOn August 27, 2004, the Company
acquired all of the outstanding capital stock of Leach Holding Corporation (Leach), a
$119 million (sales) manufacturer of electrical power switching, control and data
communication devices for the aerospace industry for approximately $145.0 million
(approximately $147.0 million including acquisition costs) before an adjustment for
the change in working capital from December 31, 2003 to closing, pursuant to an
Agreement and Plan of Merger dated as of July 8, 2004 (Agreement). Leach also
manufactures medical diagnostic, therapeutic and patient monitoring devices, and
analytical, optical and biosensor instruments for medical, laboratory and industrial
applications. The acquisition was funded with available cash and a draw on the Companys
credit facility.

An escrow account for
$12.5 million was established under the Agreement, which is payable to the
shareholders of Leach, subject to certain Leach shareholder indemnifications. The
acquisition expands the Companys capabilities in providing solutions to its
customers power distribution and diagnostic monitoring requirements.

The aerospace business is included in
the Sensors & Systems segment and the medical business is included in the
Avionics & Controls segment.

The following summarizes the
estimated fair market value of the assets acquired and liabilities assumed at the date of
acquisition. The allocation of the purchase price was based upon a preliminary valuation
report and accordingly, the allocation is subject to refinement. The amount allocated to
goodwill is not expected to be deductible for income tax purposes.

In Thousands

As of August 27, 2004

|                                                     | 
|---------------------------------------------------- | 
|Current Assets                                       | 
|Property, plant and equipment                        | 
|Intangible assets subject to amortization            | 
|Programs (20 year weighted average useful life)      | 
|Patents (15 year weighted average useful life)       | 
|Leasehold interest (64 year remaining term of lease) | 
|Other (10 year useful life)                          | 
|                                                    
|                                                     | 
|                                                     | 
|Trade names (not subject to amortization)            | 
|Deferred income tax benefits                         | 
|Goodwill                                             | 
|Other assets                                         | 
|                                                    
|Total assets acquired                                | 

-57-

---

|                              | 
|----------------------------- | 
|Current liabilities assumed   | 
|Long-term debt                | 
|Pension and other liabilities | 
|Deferred tax liabilities      | 
|Minority interest             | 
|                             
|Net assets acquired           | 
|                             

On December 1, 2003, the Company
acquired all of the outstanding capital stock of AVISTA, Incorporated (AVISTA), a
$10 million (sales) Wisconsin-based developer of embedded avionics software, for
approximately $6.5 million in cash. A purchase price adjustment is payable to the
seller in December 2004 and 2005 contingent upon the achievement of financial results as
defined in the Stock Purchase Agreement. The December 2004 purchase price adjustment is
approximately $3.3 million, which will be recorded in the first quarter of fiscal
2005 as additional consideration for the acquired assets. AVISTA provides a software
engineering center to support the Companys customers with such applications as
primary flight displays, flight management systems, air data computers and engine control
systems. AVISTA is included in the Avionics & Controls segment and the results of
its operations were included from the effective date of the acquisition. Revenues are
largely fees charged for software engineering services.

On June 11, 2003, the
Company acquired a group of companies referred to as the Weston Group from The Roxboro
Group PLC for U.K. £55.0 million in cash (approximately $94.6 million
based on the closing exchange rate and including acquisition costs). The acquisition was
financed with a portion of the proceeds from the issuance of $175.0 million in 7.75%
Senior Subordinated Notes due June 15, 2013. The Company hedged the U.K.
£55.0 million cash price using foreign currency forward contracts and recorded
a foreign currency gain of approximately $2.7 million at closing of the acquisition
and the settlement of foreign currency forward contracts.

The Weston Group supplies sensors and
systems principally for the measurement of temperature, and also for rotational speed,
torque, and density. The Weston Groups product offerings are sold primarily into the
commercial aerospace market and to a lesser degree, the industrial gas turbine market. The
acquisition is included in the Sensors & Systems segment and complements the
Companys existing product offerings. Integration of the Weston Group and certain
required expense reductions in the Sensors & Systems segment resulted in
severance and early retirement expense of approximately $4.5 million in fiscal 2004.
The severance and early retirement covered 55 employees in engineering, production,
quality, research and development and administration functions.

The following summarizes the
estimated fair market value of the assets acquired and liabilities assumed at the date of
acquisition.

-58-

---

In Thousands

As of June 11, 2003

|                                                | 
|----------------------------------------------- | 
|Current Assets                                  | 
|Property, plant and equipment                   | 
|Intangible assets subject to amortization       | 
|Programs (20 year weighted average useful life) | 
|Patents (15 year weighted average useful life)  | 
|Other (10 year useful life)                     | 
|                                               
|                                                | 
|                                                | 
|Trade names (not subject to amortization)       | 
|Goodwill                                        | 
|Other assets                                    | 
|                                               
|Total assets acquired                           | 
|                                                | 
|Current liabilities assumed                     | 
|Deferred tax liabilities                        | 
|                                               
|Net assets acquired                             | 
|                                               

On January 2, 2003, the
Company acquired the net assets of BVR Aero Precision Corporation (BVR), a manufacturer of
precision gears and electronic data concentrators, for $11.4 million in cash. An
additional payment of $3.8 million is contingent upon achievement of certain sales
levels through fiscal 2006, as defined in the Asset Purchase Agreement. Any additional
payment made, when the contingency is resolved, will be accounted for as additional
consideration for the acquired assets. BVR is included in the Sensors & Systems
segment and enhances the Companys position in aerospace sensors.

On August 29, 2002, the
Companys Armtec Defense Products Co. subsidiary (Armtec) acquired BAE Systems
radar countermeasures chaff and infrared decoy flare operations for approximately
$71.4 million in cash. At the time of the asset acquisition from BAE Systems, certain
environmental remedial activities were required under a Part B Permit issued to the
infrared decoy flare facility by the State of Arkansas under the Federal Resource
Conservation and Recovery Act. The Part B Permit was transferred to Armtec, along
with the remedial obligations. Under the Asset Purchase Agreement, BAE Systems agreed to
complete all remedial obligations at the infrared decoy flare facility and to indemnify
Esterline on all environmental liabilities to a maximum amount of $25.0 million.

Radar countermeasure chaff is used by
aircraft to help protect against radar-guided missiles. Aircraft-dispensable flares are
designed to protect against infrared-guided missiles. The business operates as a division
of Armtec and complements Armtecs position as the U.S. Armys sole-source
provider of combustible ordnance for tank, artillery, and mortar ammunition.

-59-

---

The following summarizes the
estimated fair market values of the assets acquired and liabilities assumed at the date of
acquisition. The amount allocated to goodwill is expected to be deductible for income tax
purposes. In fiscal 2003, the Company finalized its purchase price allocation, which is
reflected below:

In Thousands

As of August 29, 2002

|                                                | 
|----------------------------------------------- | 
|Current assets                                  | 
|Property, plant and equipment                   | 
|Intangible assets subject to amortization       | 
|Programs (17 year weighted average useful life) | 
|Patents (10 year useful life)                   | 
|                                               
|                                                | 
|                                                | 
|Goodwill                                        | 
|                                               
|Total assets acquired                           | 
|                                                | 
|Current liabilities assumed                     | 
|                                               
|Net assets acquired                             | 
|                                               

On April 29, 2002, the
Company acquired Burke Industries Engineered Polymers Group (Polymers Group) for
approximately $37.6 million in cash. The acquired group is a manufacturer of
aerospace seals and similar high-performance products. The Polymers Group is included in
the Advanced Materials segment. The acquisition added to the Companys existing
technology base and establishes the Company as a global leader in custom aerospace seals
and similar high-performance products.

The following summarizes the
estimated fair market values of the assets acquired and liabilities assumed at the date of
acquisition. The amount allocated to goodwill is expected to be deductible for income tax
purposes.

In Thousands

As of April 29, 2002

|                                               | 
|---------------------------------------------- | 
|Current assets                                 | 
|Property, plant and equipment                  | 
|Intangible assets subject to amortization      | 
|Core technology (15 year useful life)          | 
|Programs (9 year weighted average useful life) | 
|                                              
|                                               | 
|                                               | 
|Goodwill                                       | 
|                                              
|Total assets acquired                          | 
|                                               | 
|Current liabilities assumed                    | 
|                                              
|Net assets acquired                            | 
|                                              
|                                               | 

-60-

---

On June 3, 2002, the
Company acquired Janco Corporation (Janco) for approximately $13.8 million in cash.
Janco manufactures aircraft rotary switches, potentiometers and sophisticated modular
control systems. In addition, the Company acquired a product line for approximately
$5.7 million in cash.

The above acquisitions were accounted
for under the purchase method of accounting and the results of operations were included
from the effective date of each acquisition.

DivestituresDuring the fourth quarter of fiscal
2004, the Company sold a product line in its Sensors & Systems segment and recorded a gain
of $3.4 million. In the second quarter of fiscal 2003, the Company sold a product
line in its Sensors & Systems segment and reported a net loss on sale of $66,000.

-61-

---

# NOTE 16:  Business
Segment Information

In the third quarter of fiscal 2002,
the Companys Board of Directors approved a plan providing for the discontinuation of
the Automation segment. Subsequent to that decision, management redefined the
Companys segments to correspond with the way the Company is now organized and
managed. Accordingly, business segment information includes the segments of
Avionics & Controls, Sensors & Systems and Advanced Materials.
Operations within the Avionics & Controls segment focus on technology interface
systems for commercial and military aircraft, and similar devices for land- and sea-based
military vehicles, secure communications systems, specialized medical equipment and other
industrial applications. Sensors & Systems includes operations that produce
high-precision temperature and pressure sensors, electrical power switching, control and data communication devices, fluid and motion control components and
other related systems principally for aerospace and defense customers. The Advanced
Materials segment focuses on high-performance elastomer products used in a wide range of
commercial aerospace and military applications, and combustible ordnance and electronic
warfare countermeasure devices. Sales in all segments include domestic, international, defense and commercial customers.

Geographic sales information is based
on product origin. The Company evaluates these segments based on segment profits prior to
net interest, other income/expense, corporate expenses and federal/foreign income taxes.

-62-

---

Details of the Companys operations by business segment for the last three fiscal years were as follows:

In Thousands

|                                    | 2004 |  | 2003 |         | 2002 |  
|----------------------------------- | ---- |  | ---- | ------- | ---- | -
|Sales                               |      |  |      |         |      |  
|Avionics & Controls                 |      |  | $    | 209,498 |      | $
|Sensors & Systems                   |      |  |      | 194,803 |      |  
|Advanced Materials                  |      |  |      | 223,344 |      |  
|Other                               |      |  |      | 524     |      |  
|                                   
|                                    |      |  | $    | 628,169 |      | $
|                                   
|                                    |      |  |      |         |      |  
|Income From Continuing Operations   |      | 
|Avionics & Controls                 |      |  | $    | 33,079  |      | $
|Sensors & Systems                   |      |  |      | 10,621  |      |  
|Advanced Materials                  |      |  |      | 29,497  |      |  
|Other                               |      |  |      | (573    | )    |  
|                                   
|Segment Earnings                    |      |  |      | 72,624  |      |  
|                                    |      |  |      |         |      |  
|Corporate expense                   |      |  |      | (16,471 | )    |  
|Gain (loss) on sale of product line |      |  |      | 3,943   |      |  
|Gain (loss) on derivative           |      | 
|financial instruments               |      |  |      |        |      |  
|Interest income                     |      |  |      | 1,964   |      |  
|Interest expense                    |      |  |      | (17,339 | )    |  
|                                   
|                                    |      |  | $    | 44,721  |      | $
|                                   
|                                    |      |  |      |         |      |  
|Identifiable Assets                 |      | 
|Avionics & Controls                 |      |  | $    | 198,142 |      | $
|Sensors & Systems                   |      |  |      | 374,123 |      |  
|Advanced Materials                  |      |  |      | 267,811 |      |  
|Other                               |      |  |      | 2       |      |  
|Discontinued operations             |      |  |      |        |      |  
|Corporate1                          |      |  |      | 92,755  |      |  
|                                   
|                                    |      |  | $    | 932,833 |      | $
|                                   
|                                    |      |  |      |         |      |  
|Capital Expenditures                |      | 
|Avionics & Controls                 |      |  | $    | 6,483   |      | $
|Sensors & Systems                   |      |  |      | 3,600   |      |  
|Advanced Materials                  |      |  |      | 11,492  |      |  
|Other                               |      |  |      |        |      |  
|Discontinued operations             |      |  |      | 61      |      |  
|Corporate                           |      |  |      | 490     |      |  
|                                   
|                                    |      |  | $    | 22,126  |      | $
|                                   

-63-

---

In Thousands

|                              | 2004 |  | 2003 |        | 2002 |  
|----------------------------- | ---- |  | ---- | ------ | ---- | -
|Depreciation and Amortization |      |  |      |        |      |  
|Avionics & Controls           |      |  | $    | 5,525  |      | $
|Sensors & Systems             |      |  |      | 10,954 |      |  
|Advanced Materials            |      |  |      | 12,394 |      |  
|Other                         |      |  |      |       |      |  
|Discontinued operations       |      |  |      | 835    |      |  
|Corporate                     |      |  |      | 1,437  |      |  
|                             
|                              |      |  | $    | 31,145 |      | $
|                             

|1 | Primarily
cash, prepaid pension expense (see Note 9) and deferred tax assets (see Note 10).
|- | -------------------------------------------------------------------------------------------

The Companys operations by
geographic area for the last three fiscal years were as follows:

In Thousands

|                                | 2004 |  | 2003 |         | 2002 |  
|------------------------------- | ---- |  | ---- | ------- | ---- | -
|Sales                           |      |  |      |         |      |  
|Domestic                        |      | 
|Unaffiliated customers  U.S.   |      |  | $    | 383,561 |      | $
|Unaffiliated customers  export |      |  |      | 88,989  |      |  
|Intercompany                    |      |  |      | 3,549   |      |  
|                               
|                                |      |  |      | 476,099 |      |  
|                               
|                                |      |  |      |         |      |  
|France                          |      | 
|Unaffiliated customers          |      |  |      | 58,788  |      |  
|Intercompany                    |      |  |      | 5,050   |      |  
|                               
|                                |      |  |      | 63,838  |      |  
|                               
|                                |      |  |      |         |      |  
|United Kingdom                  |      | 
|Unaffiliated customers          |      |  |      | 90,531  |      |  
|Intercompany                    |      |  |      | 2,406   |      |  
|                               
|                                |      |  |      | 92,937  |      |  
|                               
|                                |      |  |      |         |      |  
|All Other Foreign               |      | 
|Unaffiliated customers          |      |  |      | 6,300   |      |  
|Intercompany                    |      |  |      | 938     |      |  
|                               
|                                |      |  |      | 7,238   |      |  
|                               
|                                |      |  |      |         |      |  
|Eliminations                    |      |  |      | (11,943 | )    |  
|                               
|                                |      |  | $    | 628,169 |      | $
|                               

-64-

---

|                     | 2004 |  | 2003 |         | 2002 |  
|-------------------- | ---- |  | ---- | ------- | ---- | -
|Segment Earnings1    |      |  |      |         |      |  
|Domestic             |      |  | $    | 66,680  |      | $
|France               |      |  |      | 772     |      |  
|United Kingdom       |      |  |      | 4,998   |      |  
|All other foreign    |      |  |      | 174     |      |  
|                    
|                     |      |  | $    | 72,624  |      | $
|                    
|                     |      |  |      |         |      |  
|Identifiable Assets2 |      | 
|Domestic             |      |  | $    | 432,365 |      | $
|France               |      |  |      | 197,431 |      |  
|United Kingdom       |      |  |      | 202,411 |      |  
|All other foreign    |      |  |      | 7,871   |      |  
|                    
|                     |      |  | $    | 840,078 |      | $
|                    

|1 | Before
corporate expense, shown on page 63.
|- | -------------------------------------------

|2 | Excludes corporate, shown on page 63.
|- | -------------------------------------

The Companys principal foreign
operations consist of manufacturing facilities located in France, Germany and the United
Kingdom, and include sales and service operations located in Singapore and China.
Sensors & Systems segment operations are dependent upon foreign sales, which
represented $144.3 million, $117.0 million and $87.8 million of
Sensors & Systems sales in fiscal 2004, 2003 and 2002, respectively. Intercompany
sales are at prices comparable with sales to unaffiliated customers. U.S. Government
sales as a percent of Advanced Materials and Avionics & Controls sales were 35.9%
and 9.4%, respectively, in fiscal 2004 and 16.6% of consolidated sales. In fiscal 2003,
U.S. Government sales as a percent of Advanced Materials and Avionics & Controls
sales were 36.1% and 7.4%, respectively, and 16.8% of consolidated sales.

Product lines contributing sales of
10% or more of total sales in any of the last three fiscal years were as follows:

|                                  | 2004 |  | 2003 |     | 2002 | 
|--------------------------------- | ---- |  | ---- | --- | ---- | 
|                                  |      |  |      |     |      | 
|Elastomeric products              |      |  |      | 16% |      | 
|Sensors                           |      |  |      | 21% |      | 
|Aerospace switches and indicators |      |  |      | 13% |      | 
|Combustible ordnance components   |      |  |      | 8%  |      | 
|                                 

-65-

---

# NOTE 17:  Quarterly
Financial Data (Unaudited)

The following is a summary of
unaudited quarterly financial information:

In Thousands, Except Per Share
Amounts

|Fiscal Year 2004                     | Fourth |  | Third |         | Second |   | First   | 
|------------------------------------ | ------ |  | ----- | ------- | ------ | - | ------- | 
|                                     |        |  |       |         |        |   |         | 
|Net sales                            |        |  | $     | 194,763 |        | $ | 150,614 | 
|Gross margin                         |        |  |       | 64,106  |        |   | 47,145  | 
|                                     |        |  |       |         |        |   |         | 
|Income from continuing operations    |        |  |       | 15,233  | 1      |   | 7,023   | 
|Income from discontinued operations, |        | 
|net of tax                           |        |  |       | 7,883   |        |   | 626     | 
|                                    
|Net earnings                         |        |  | $     | 23,116  | 1      | $ | 7,649   | 
|                                    
|                                     |        |  |       |         |        |   |         | 
|Earnings per share  basic           |        | 
|Continuing operations                |        |  | $     | .71     |        | $ | .33     | 
|Discontinued operations3             |        |  |       | .37     |        |   | .03     | 
|                                    
|Earnings per share  basic3          |        |  | $     | 1.08    |        | $ | .36     | 
|                                    
|                                     |        |  |       |         |        |   |         | 
|Earnings per share  diluted         |        | 
|Continuing operations3               |        |  | $     | .70     |        | $ | .33     | 
|Discontinued operations3             |        |  |       | .37     |        |   | .03     | 
|                                    
|Earnings per share  diluted3        |        |  | $     | 1.07    |        | $ | .36     | 
|                                    

-66-

---

In Thousands, Except Per Share Amounts

|Fiscal Year 2003                   | Fourth |  | Third |         | Second |   | First   |  
|---------------------------------- | ------ |  | ----- | ------- | ------ | - | ------- | -
|                                   |        |  |       |         |        |   |         |  
|Net sales                          |        |  | $     | 160,326 |        | $ | 140,518 |  
|Gross margin                       |        |  |       | 53,680  |        |   | 45,706  |  
|                                   |        |  |       |         |        |   |         |  
|Income from continuing operations  |        |  |       | 9,412   |        |   | 8,444   | 4
|Loss from discontinued operations, |        | 
|net of tax                         |        |  |       |        |        |   |        |  
|                                  
|Net earnings                       |        |  | $     | 9,412   |        | $ | 8,444   | 4
|                                  
|                                   |        |  |       |         |        |   |         |  
|Earnings per share  basic         |        | 
|Continuing operations              |        |  | $     | .45     |        | $ | .40     |  
|Discontinued operations3           |        |  |       |        |        |   |        |  
|                                  
|Earnings per share  basic3        |        |  | $     | .45     |        | $ | .40     |  
|                                  
|                                   |        |  |       |         |        |   |         |  
|Earnings per share  diluted       |        | 
|Continuing operations3             |        |  | $     | .44     |        | $ | .40     |  
|Discontinued operations3           |        |  |       |        |        |   |        |  
|                                  
|Earnings per share  diluted3      |        |  | $     | .44     |        | $ | .40     |  
|                                  

|1 | Included
a $3.4 million gain on the sale of a product line in the Sensors & Systems
segment.
|- | --------------------------------------------------------------------------------------------

|2 | Included
$4.5 million in legal, severance and early retirement expense in the Sensors & Systems
segment. Included a $1.9 million reduction of previously estimated tax liabilities
associated with the receipt of a NOPA from the Internal Revenue Service.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | The
sum of the quarterly per share amounts may not equal per share amounts reported for
year-to-date periods. This is due to changes in the number of weighted average shares
outstanding and the effects of rounding for each period.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4 | Included
the $2.7 million foreign currency gain recorded upon settlement of foreign currency
forward contracts used to hedge the U.K. £55.0 million cash price for the
Weston Group. Included $929,000 in severance incurred in connection with the closing of
facilities and termination of affected employees of a product line in the Sensors & Systems
segment.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5 | Included
an $863,000 gain on the sale of a product line in the Sensors & Systems segment.
|- | -----------------------------------------------------------------------------------------

-67-

---

# NOTE 18:  Guarantors

The following schedules set forth condensed
consolidating financial information as required by Rule 3-10 of Securities and
Exchange Commission Regulation S-X for fiscal 2004, 2003 and 2002 for
(a) Esterline Technologies Corporation (the Parent); (b) on a combined basis, the
subsidiary guarantors (Guarantor Subsidiaries) of the Senior Subordinated Notes which
include Advanced Input Devices, Inc., Amtech Automated Manufacturing Technology,
Angus Electronics Co., Armtec Countermeasures Co., Armtec Defense
Products Co., Auxitrol Co., AVISTA, Incorporated, Boyar-Schultz Corporation, BVR
Technologies Co., Equipment Sales Co., EA Technologies Corporation, Esterline
Technologies Holdings Limited, Fluid Regulators Corporation, H.A. Sales Co., Hauser
Inc., Hytek Finishes Co., Janco Corporation, Kirkhill-TA Co., Korry
Electronics Co., Leach Holding Corporation, Leach International Corporation, Leach
Technology Group, Inc., Mason Electric Co., MC Tech Co., Memtron
Technologies Co., Norwich Aero Products, Inc., Pressure Systems, Inc.,
Pressure Systems International, Inc., SureSeal Corporation, Surftech
Finishes Co., UMM Electronics Inc., and (c) on a combined basis, the subsidiary
non-guarantors (Non-Guarantor Subsidiaries), which include Auxitrol S.A., Auxitrol
Technologies S.A., Auxitrol Asia PTE Ltd., Esterline Technologies DK Aps
(Denmark), Esterline Technologies Ltd. (England), Esterline Technologies Ltd.
(Hong Kong), Excellon Europa GmbH, Excellon France S.A.R.L., Guizhou Leach-Tianyi
Aviation Electrical Company Ltd. (China), Leach International Asia-Pacific Ltd. (Hong
Kong), Leach International Europe S.A. (France), Leach International Germany GmbH
(Germany), Leach International Mexico S. de R.L. de C.V. (Mexico), Leach International
U.K. (England), LRE Technologies Partner GmbH (Germany), Muirhead Aerospace Ltd.,
Norcroft Dynamics Ltd., Pressure Systems International Ltd., Weston Aero Ltd.
(England), and Weston Aerospace, Ltd. (England). The guarantor subsidiaries are direct and
indirect wholly-owned subsidiaries of Esterline Technologies and have fully and
unconditionally, jointly and severally, guaranteed the Senior Subordinated Notes.

-68-

---

Condensed Consolidating
Balance Sheet as of October 29, 2004

In Thousands

|                                 | Parent |  | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |   | Eliminations |  | Total |        
|-------------------------------- | ------ |  | ---------------------- | ------- | --------------------------- | - | ------------ |  | ----- | -------
|Assets                           |        |  |                        |         |                             |   |              |  |       |        
|                                 |        |  |                        |         |                             |   |              |  |       |        
|Current Assets                   |        | 
|Cash and cash equivalents        |        |  | $                      | 6,859   |                             | $ | 2,353        |  | $     | 20,267 
|Cash in escrow                   |        |  |                        | 8,511   |                             |   |             |  |       |       
|Accounts receivable, net         |        |  |                        | 2,221   |                             |   | 83,115       |  |       | 46,870 
|Inventories                      |        |  |                        |        |                             |   | 76,168       |  |       | 42,886 
|Deferred income tax benefits     |        |  |                        | 38,115  |                             |   |             |  |       | (17,131
|Prepaid expenses                 |        |  |                        | 353     |                             |   | 3,598        |  |       | 5,490  
|Other current assets             |        |  |                        | 147     |                             |   | 288          |  |       |       
|                                
|Total Current Assets             |        |  |                        | 56,206  |                             |   | 165,522      |  |       | 98,382 
|                                 |        |  |                        |         |                             |   |              |  |       |        
|Property, Plant & Equipment, Net |        |  |                        | 2,369   |                             |   | 99,360       |  |       | 43,406 
|Goodwill                         |        |  |                        |        |                             |   | 175,607      |  |       | 72,210 
|Intangibles, Net                 |        |  |                        | 141     |                             |   | 77,160       |  |       | 92,575 
|Debt Issuance Costs, Net         |        |  |                        | 5,818   |                             |   |             |  |       |       
|Deferred Income Tax Benefits     |        |  |                        | 11,216  |                             |   |             |  |       |       
|Other Assets                     |        |  |                        | 9,780   |                             |   | 18,309       |  |       | 4,772  
|Amounts Due To/From              |        | 
|Subsidiaries                     |        |  |                        | 145,244 |                             |   | 41,074       |  |       |       
|Investment in Subsidiaries       |        |  |                        | 565,336 |                             |   |             |  |       | 92     
|                                
|Total Assets                     |        |  | $                      | 796,110 |                             | $ | 577,032      |  | $     | 311,437
|                                

-69-

---

Condensed Consolidating Balance
Sheet as of October 29, 2004

In Thousands

|                                     | Parent |  | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |   | Eliminations |  | Total |        
|------------------------------------ | ------ |  | ---------------------- | ------- | --------------------------- | - | ------------ |  | ----- | -------
|Liabilities and Shareholders' Equity |        |  |                        |         |                             |   |              |  |       |        
|                                     |        |  |                        |         |                             |   |              |  |       |        
|Current Liabilities                  |        | 
|Accounts payable                     |        |  | $                      | 520     |                             | $ | 16,814       |  | $     | 20,533 
|Accrued liabilities                  |        |  |                        | 29,880  |                             |   | 41,466       |  |       | 25,692 
|Credit facilities                    |        |  |                        | 5,000   |                             |   |             |  |       | 1,977  
|Current maturities of                |        | 
|long-term debt                       |        |  |                        |        |                             |   | 50           |  |       | 981    
|Federal and foreign                  |        | 
|income taxes                         |        |  |                        | 2,996   |                             |   | 75           |  |       | 3,607  
|                                    
|Total Current Liabilities            |        |  |                        | 38,396  |                             |   | 58,405       |  |       | 52,790 
|                                     |        |  |                        |         |                             |   |              |  |       |        
|Long-Term Debt, Net                  |        |  |                        | 246,769 |                             |   | 7            |  |       | 2,280  
|Deferred Income Taxes                |        |  |                        | 43,149  |                             |   |             |  |       | 294    
|Other Liabilities                    |        |  |                        | 9,283   |                             |   | 13,840       |  |       | 6,729  
|Amounts Due To (From)                |        | 
|Subsidiaries                         |        |  |                        |        |                             |   |             |  |       | 184,094
|Minority Interest                    |        |  |                        |        |                             |   |             |  |       | 2,378  
|Shareholders' Equity                 |        |  |                        | 458,513 |                             |   | 504,780      |  |       | 62,872 
|                                    
|Total Liabilities and                |        | 
|Shareholders' Equity                 |        |  | $                      | 796,110 |                             | $ | 577,032      |  | $     | 311,437
|                                    

-70-

---

Condensed Consolidating Statement of Operations
for the fiscal year ended October 29, 2004

In Thousands

|                              | Parent |  | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |        
|----------------------------- | ------ |  | ---------------------- | ------- | --------------------------- | - | ------------ | - | ----- | -------
|Net Sales                     |        |  | $                      |        |                             | $ | 475,626      |   | $     | 155,073
|Cost of Sales                 |        |  |                        |        |                             |   | 328,307      |   |       | 100,835
|                             
|                              |        |  |                        |        |                             |   | 147,319      |   |       | 54,238 
|Expenses                      |        | 
|Selling, general              |        | 
|and administrative            |        |  |                        |        |                             |   | 79,116       |   |       | 38,573 
|Research, development         |        | 
|and engineering               |        |  |                        |        |                             |   | 12,134       |   |       | 15,581 
|                             
|Total Expenses                |        |  |                        |        |                             |   | 91,250       |   |       | 54,154 
|                             
|Operating Earnings from       |        | 
|Continuing Operations         |        |  |                        |        |                             |   | 56,069       |   |       | 84     
|                              |        |  |                        |         |                             |   |              |   |       |        
|Gain on sale of business      |        |  |                        | (1,700  | )                           |   |             |   |       | (1,734 
|Interest income               |        |  |                        | (14,316 | )                           |   | (3,017       | ) |       | (828   
|Interest expense              |        |  |                        | 17,010  |                             |   | 3,275        |   |       | 13,251 
|Other expense (income)        |        |  |                        | (520    | )                           |   | (239         | ) |       | 250    
|                             
|Other Expense, Net            |        |  |                        | 474     |                             |   | 19           |   |       | 10,939 
|                              |        |  |                        |         |                             |   |              |   |       |        
|Income (Loss) from Continuing |        | 
|Operations Before Taxes       |        |  |                        | (474    | )                           |   | 56,050       |   |       | (10,855
|Income Tax Expense (Benefit)  |        |  |                        | (140    | )                           |   | 14,667       |   |       | (3,202 
|                             
|Income (Loss) From            |        | 
|Continuing Operations         |        | 
|Before Minority Interest      |        |  |                        | (334    | )                           |   | 41,383       |   |       | (7,653 
|Minority Interest             |        |  |                        |        |                             |   |             |   |       | (22    
|                             
|Income (Loss) From            |        | 
|Continuing Operations         |        |  |                        | (334    | )                           |   | 41,383       |   |       | (7,675 
|                             
|                              |        |  |                        |         |                             |   |              |   |       |        
|Income From Discontinued      |        | 
|Operations, Net of Tax        |        |  |                        |        |                             |   | 9,181        |   |       |       
|Equity in Net Income of       |        | 
|Consolidated Subsidiaries     |        |  |                        | 42,889  |                             |   |             |   |       |       
|                             
|Net Income (Loss)             |        |  | $                      | 42,555  |                             | $ | 50,564       |   | $     | (7,675 
|                             

-71-

---

Condensed Consolidating Statement of
Cash Flows for the fiscal year ended October 29, 2004

In Thousands

|                                                   | Parent |  | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |        
|-------------------------------------------------- | ------ |  | ---------------------- | ------- | --------------------------- | - | ------------ | - | ----- | -------
|                                                   |        |  |                        |         |                             |   |              |   |       |        
|Cash Flows Provided (Used) by Operating Activities |        |  |                        |         |                             |   |              |   |       |        
|Net earnings (loss)                                |        |  | $                      | 42,555  |                             | $ | 50,564       |   | $     | (7,675 
|Minority interest                                  |        |  |                        |        |                             |   |             |   |       | 22     
|Depreciation & amortization                        |        |  |                        |        |                             |   | 22,320       |   |       | 8,825  
|Deferred income tax                                |        |  |                        | 3,693   |                             |   |             |   |       | (111   
|Gain on disposal of                                |        | 
|discontinued operations                            |        |  |                        |        |                             |   | (12,521      | ) |       |       
|Gain on sale of land                               |        |  |                        |        |                             |   | (892         | ) |       |       
|Gain on sale of product line                       |        |  |                        | (1,700  | )                           |   |             |   |       | (1,734 
|Working capital changes, net of                    |        | 
|effect of acquisitions                             |        | 
|Accounts receivable                                |        |  |                        | (2,126  | )                           |   | (5,513       | ) |       | (1,393 
|Inventories                                        |        |  |                        |        |                             |   | (6,897       | ) |       | (2,198 
|Prepaid expenses                                   |        |  |                        | (219    | )                           |   | 760          |   |       | (1,200 
|Accounts payable                                   |        |  |                        | 382     |                             |   | (684         | ) |       | 2,902  
|Accrued liabilities                                |        |  |                        | 11,800  |                             |   | (1,444       | ) |       | (116   
|Federal & foreign income taxes                     |        |  |                        | 8,935   |                             |   | (804         | ) |       | 820    
|Other liabilities                                  |        |  |                        | 9,283   |                             |   | (923         | ) |       | (4,001 
|Other, net                                         |        |  |                        | (9,734  | )                           |   | 5,668        |   |       | (1,464 
|                                                  
|                                                   |        |  |                        | 62,869  |                             |   | 49,634       |   |       | (7,323 
|                                                   |        |  |                        |         |                             |   |              |   |       |        
|Cash Flows Provided (Used) by Investing Activities |        | 
|Purchases of capital assets                        |        |  |                        | (490    | )                           |   | (18,881      | ) |       | (2,755 
|Proceeds from sale of                              |        | 
|discontinued operations                            |        |  |                        |        |                             |   | 10,000       |   |       |       
|Proceeds from sale of product line                 |        |  |                        | 1,700   |                             |   |             |   |       | 1,775  
|Proceeds from sale of land                         |        |  |                        |        |                             |   | 1,654        |   |       |       
|Escrow deposit                                     |        |  |                        | (12,500 | )                           |   |             |   |       |       
|Capital dispositions                               |        |  |                        | 23      |                             |   | 1,190        |   |       | (435   
|Sale of short-term                                 |        | 
|investments                                        |        |  |                        | 12,797  |                             |   |             |   |       |       
|Acquisitions of businesses, net                    |        |  |                        |        |                             |   | (50,855      | ) |       | (87,956
|                                                  
|                                                   |        |  |                        | 1,530   |                             |   | (56,892      | ) |       | (89,371

-72-

---

Condensed Consolidating Statement of Cash
Flows for the fiscal year ended October 29, 2004

In Thousands

|                                                   | Parent |  | Guarantor
Subsidiaries |          | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |       
|-------------------------------------------------- | ------ |  | ---------------------- | -------- | --------------------------- | - | ------------ | - | ----- | ------
|Cash Flows Provided (Used) by Financing Activities |        |  |                        |          |                             |   |              |   |       |       
|Proceeds provided by stock                         |        | 
|issuance under employee                            |        | 
|stock plans                                        |        |  |                        | 3,843    |                             |   |             |   |       |      
|Net change in credit facilities                    |        |  |                        | 5,000    |                             |   | (180         | ) |       | (698  
|Repayment of long-term debt, net                   |        |  |                        | (27,996  | )                           |   | (77          | ) |       | (1,356
|Debt and other issuance costs                      |        |  |                        | (268     | )                           |   |             |   |       |      
|Net change in intercompany                         |        | 
|financing                                          |        |  |                        | (147,967 | )                           |   | 6,927        |   |       | 98,151
|                                                  
|                                                   |        |  |                        | (167,388 | )                           |   | 6,670        |   |       | 96,097
|                                                   |        |  |                        |          |                             |   |              |   |       |       
|Effect of foreign exchange                         |        | 
|rates on cash                                      |        |  |                        | 14       |                             |   | (89          | ) |       | 2,365 
|                                                  
|                                                   |        |  |                        |          |                             |   |              |   |       |       
|Net increase (decrease) in cash                    |        | 
|and cash equivalents                               |        |  |                        | (102,975 | )                           |   | (677         | ) |       | 1,768 
|Cash and cash equivalents                          |        | 
| beginning of year                                |        |  |                        | 109,834  |                             |   | 3,030        |   |       | 18,499
|                                                  
|Cash and cash equivalents                          |        | 
| end of year                                      |        |  | $                      | 6,859    |                             | $ | 2,353        |   | $     | 20,267
|                                                  

-73-

---

Condensed Consolidating
Balance Sheet as of October 31, 2003

In Thousands

|                                 | Parent |  | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |        
|-------------------------------- | ------ |  | ---------------------- | ------- | --------------------------- | - | ------------ | - | ----- | -------
|Assets                           |        |  |                        |         |                             |   |              |   |       |        
|                                 |        |  |                        |         |                             |   |              |   |       |        
|Current Assets                   |        | 
|Cash and cash equivalents        |        |  | $                      | 109,834 |                             | $ | 3,030        |   | $     | 18,499 
|Cash in escrow                   |        |  |                        | 4,536   |                             |   |             |   |       |       
|Short-term investments           |        |  |                        | 12,797  |                             |   |             |   |       |       
|Accounts receivable, net         |        |  |                        | 95      |                             |   | 69,297       |   |       | 29,003 
|Inventories                      |        |  |                        |        |                             |   | 57,816       |   |       | 18,529 
|Income tax refundable            |        |  |                        | 7,838   |                             |   | (160         | ) |       | (1     
|Deferred income tax benefits     |        |  |                        | 17,490  |                             |   |             |   |       | (961   
|Prepaid expenses                 |        |  |                        | 134     |                             |   | 3,797        |   |       | 3,099  
|                                
|Total Current Assets             |        |  |                        | 152,724 |                             |   | 133,780      |   |       | 68,168 
|                                 |        |  |                        |         |                             |   |              |   |       |        
|Property, Plant & Equipment, Net |        |  |                        | 2,332   |                             |   | 89,160       |   |       | 25,598 
|Goodwill                         |        |  |                        |        |                             |   | 151,696      |   |       | 33,657 
|Intangibles, Net                 |        |  |                        |        |                             |   | 67,224       |   |       | 47,706 
|Debt Issuance Costs, Net         |        |  |                        | 6,301   |                             |   |             |   |       |       
|Other Assets                     |        |  |                        | 4,015   |                             |   | 18,723       |   |       | (454   
|Amounts Due To/From              |        | 
|Subsidiaries                     |        |  |                        | 79,494  |                             |   | 17,488       |   |       |       
|Investment in Subsidiaries       |        |  |                        | 462,423 |                             |   |             |   |       | 83     
|                                
|Total Assets                     |        |  | $                      | 707,289 |                             | $ | 478,071      |   | $     | 174,758
|                                

-74-

---

Condensed Consolidating Balance
Sheet as of October 31, 2003

In Thousands

|                                     | Parent |  | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |   | Eliminations |  | Total |        
|------------------------------------ | ------ |  | ---------------------- | ------- | --------------------------- | - | ------------ |  | ----- | -------
|Liabilities and Shareholders' Equity |        |  |                        |         |                             |   |              |  |       |        
|                                     |        |  |                        |         |                             |   |              |  |       |        
|Current Liabilities                  |        | 
|Accounts payable                     |        |  | $                      | 138     |                             | $ | 14,315       |  | $     | 8,820  
|Accrued liabilities                  |        |  |                        | 22,168  |                             |   | 38,913       |  |       | 13,910 
|Credit facilities                    |        |  |                        |        |                             |   |             |  |       | 2,312  
|Current maturities of                |        | 
|long-term debt                       |        |  |                        | 30,000  |                             |   | 75           |  |       | 398    
|Federal and foreign                  |        | 
|income taxes                         |        |  |                        |        |                             |   | 17           |  |       | 1,167  
|                                    
|Total Current Liabilities            |        |  |                        | 52,306  |                             |   | 53,320       |  |       | 26,607 
|                                     |        |  |                        |         |                             |   |              |  |       |        
|Long-Term Debt, Net                  |        |  |                        | 244,765 |                             |   | 59           |  |       | 1,968  
|Deferred Income Taxes                |        |  |                        | 27,325  |                             |   |             |  |       |       
|Net Liabilities of                   |        | 
|Discontinued Operations              |        |  |                        |        |                             |   | 2,719        |  |       | (2,311 
|Amounts Due To (From)                |        | 
|Subsidiaries                         |        |  |                        | (10,979 | )                           |   |             |  |       | 119,504
|Shareholders' Equity                 |        |  |                        | 393,872 |                             |   | 421,973      |  |       | 28,990 
|                                    
|Total Liabilities and                |        | 
|Shareholders' Equity                 |        |  | $                      | 707,289 |                             | $ | 478,071      |  | $     | 174,758
|                                    

-75-

---

Condensed Consolidating Statement of Operations
for the fiscal year ended October 31, 2003

In Thousands

|                              | Parent |  | Guarantor
Subsidiaries |        | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |        
|----------------------------- | ------ |  | ---------------------- | ------ | --------------------------- | - | ------------ | - | ----- | -------
|Net Sales                     |        |  | $                      |       |                             | $ | 439,373      |   | $     | 124,638
|Cost of Sales                 |        |  |                        |       |                             |   | 300,807      |   |       | 84,575 
|                             
|                              |        |  |                        |       |                             |   | 138,566      |   |       | 40,063 
|Expenses                      |        | 
|Selling, general              |        | 
|and administrative            |        |  |                        |       |                             |   | 82,247       |   |       | 25,550 
|Research, development         |        | 
|and engineering               |        |  |                        |       |                             |   | 9,306        |   |       | 10,218 
|                             
|Total Expenses                |        |  |                        |       |                             |   | 91,553       |   |       | 35,768 
|                             
|Operating Earnings from       |        | 
|Continuing Operations         |        |  |                        |       |                             |   | 47,013       |   |       | 4,295  
|                              |        |  |                        |        |                             |   |              |   |       |        
|Loss on sale of business      |        |  |                        |       |                             |   |             |   |       | 66     
|Gain on derivative            |        | 
|financial instruments         |        |  |                        | (2,676 | )                           |   |             |   |       |       
|Interest income               |        |  |                        | (5,492 | )                           |   | (2,511       | ) |       | (370   
|Interest expense              |        |  |                        | 11,624 |                             |   | 2,530        |   |       | 5,346  
|Other expense (income)        |        |  |                        | (116   | )                           |   | 96           |   |       | 20     
|                             
|Other Expense, Net            |        |  |                        | 3,340  |                             |   | 115          |   |       | 5,062  
|                              |        |  |                        |        |                             |   |              |   |       |        
|Income (Loss) from Continuing |        | 
|Operations Before Taxes       |        |  |                        | (3,340 | )                           |   | 46,898       |   |       | (767   
|Income Tax Expense (Benefit)  |        |  |                        | (868   | )                           |   | 14,164       |   |       | (246   
|                             
|Income (Loss) From            |        | 
|Continuing Operations         |        |  |                        | (2,472 | )                           |   | 32,734       |   |       | (521   
|                              |        |  |                        |        |                             |   |              |   |       |        
|Loss From Discontinued        |        | 
|Operations, Net of Tax        |        |  |                        |       |                             |   | (5,808       | ) |       |       
|Equity in Net Income of       |        | 
|Consolidated Subsidiaries     |        |  |                        | 26,405 |                             |   |             |   |       |       
|                             
|Net Income (Loss)             |        |  | $                      | 23,933 |                             | $ | 26,926       |   | $     | (521   
|                             

-76-

---

Condensed Consolidating Statement of
Cash Flows for the fiscal year ended October 31, 2003

In Thousands

|                                                   | Parent |  | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |        
|-------------------------------------------------- | ------ |  | ---------------------- | ------- | --------------------------- | - | ------------ | - | ----- | -------
|Cash Flows Provided (Used) by Operating Activities |        |  |                        |         |                             |   |              |   |       |        
|Net earnings (loss)                                |        |  | $                      | 23,933  |                             | $ | 26,926       |   | $     | (521   
|Depreciation & amortization                        |        |  |                        |        |                             |   | 22,230       |   |       | 3,985  
|Deferred income tax (benefit)                      |        |  |                        | 13,525  |                             |   | (4,221       | ) |       | (595   
|Loss on disposal and holding                       |        | 
|period loss on discontinued                        |        | 
|operations                                         |        |  |                        |        |                             |   | 9,282        |   |       |       
|Loss on sale of product line                       |        |  |                        |        |                             |   |             |   |       | 66     
|Working capital changes, net of                    |        | 
|effect of acquisitions                             |        | 
|Accounts receivable                                |        |  |                        | 154     |                             |   | (10,824      | ) |       | 1,154  
|Inventories                                        |        |  |                        |        |                             |   | 2,078        |   |       | 4,244  
|Prepaid expenses                                   |        |  |                        | (97     | )                           |   | (8           | ) |       | 222    
|Accounts payable                                   |        |  |                        | 115     |                             |   | 503          |   |       | (5,014 
|Accrued liabilities                                |        |  |                        | 7,905   |                             |   | 1,155        |   |       | (4,134 
|Federal & foreign income taxes                     |        |  |                        | (7,451  | )                           |   | 6,639        |   |       | (111   
|Other, net                                         |        |  |                        | (1,754  | )                           |   | (2,397       | ) |       | 4,348  
|                                                  
|                                                   |        |  |                        | 36,330  |                             |   | 51,363       |   |       | 3,644  
|                                                   |        |  |                        |         |                             |   |              |   |       |        
|Cash Flows Provided (Used) by Investing Activities |        | 
|Purchases of capital assets                        |        |  |                        | (2,235  | )                           |   | (12,334      | ) |       | (2,561 
|Proceeds from sale of business                     |        |  |                        |        |                             |   | 3,850        |   |       | 5,630  
|Escrow deposit                                     |        |  |                        | (1,036  | )                           |   |             |   |       |       
|Capital dispositions                               |        |  |                        | 38      |                             |   | 581          |   |       | 147    
|Purchase of short-term                             |        | 
|investments                                        |        |  |                        | (12,797 | )                           |   |             |   |       |       
|Acquisitions of businesses, net                    |        |  |                        |        |                             |   | (32,767      | ) |       | (78,968
|                                                  
|                                                   |        |  |                        | (16,030 | )                           |   | (40,670      | ) |       | (75,752

-77-

---

Condensed Consolidating Statement of Cash
Flows for the fiscal year ended October 31, 2003

In Thousands

|                                                   | Parent |  | Guarantor
Subsidiaries |         | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |       
|-------------------------------------------------- | ------ |  | ---------------------- | ------- | --------------------------- | - | ------------ | - | ----- | ------
|Cash Flows Provided (Used) by Financing Activities |        |  |                        |         |                             |   |              |   |       |       
|Proceeds provided by stock                         |        | 
|issuance under employee                            |        | 
|stock plans                                        |        |  |                        | 3,280   |                             |   |             |   |       |      
|Net change in credit facilities                    |        |  |                        |        |                             |   |             |   |       | 2,279 
|Repayment of long-term debt                        |        |  |                        | (235    | )                           |   | (76          | ) |       | (421  
|Debt and other issuance costs                      |        |  |                        | (7,735  | )                           |   |             |   |       |      
|Proceeds from note issuance                        |        |  |                        | 175,000 |                             |   |             |   |       |      
|Investment in subsidiaries                         |        |  |                        | (87,295 | )                           |   | (9,113       | ) |       | 70,003
|                                                  
|                                                   |        |  |                        | 83,015  |                             |   | (9,189       | ) |       | 71,861
|                                                   |        |  |                        |         |                             |   |              |   |       |       
|Effect of foreign exchange                         |        | 
|rates on cash                                      |        |  |                        | (83     | )                           |   | 41           |   |       | 4,322 
|                                                  
|                                                   |        |  |                        |         |                             |   |              |   |       |       
|Net increase in cash                               |        | 
|and cash equivalents                               |        |  |                        | 103,232 |                             |   | 1,545        |   |       | 4,075 
|Cash and cash equivalents                          |        | 
| beginning of year                                |        |  |                        | 6,602   |                             |   | 1,485        |   |       | 14,424
|                                                  
|Cash and cash equivalents                          |        | 
| end of year                                      |        |  | $                      | 109,834 |                             | $ | 3,030        |   | $     | 18,499
|                                                  

-78-

---

Condensed Consolidating Statement of
Operations for the fiscal year ended October 25, 2002

In Thousands

|                              | Parent |  | Guarantor
Subsidiaries |        | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |       
|----------------------------- | ------ |  | ---------------------- | ------ | --------------------------- | - | ------------ | - | ----- | ------
|Net Sales                     |        |  | $                      |       |                             | $ | 345,689      |   | $     | 90,400
|Cost of Sales                 |        |  |                        |       |                             |   | 238,524      |   |       | 55,992
|                             
|                              |        |  |                        |       |                             |   | 107,165      |   |       | 34,408
|Expenses                      |        | 
|Selling, general              |        | 
|and administrative            |        |  |                        |       |                             |   | 60,910       |   |       | 18,176
|Research, development         |        | 
|and engineering               |        |  |                        |       |                             |   | 7,472        |   |       | 7,961 
|                             
|Total Expenses                |        |  |                        |       |                             |   | 68,382       |   |       | 26,137
|                             
|Operating Earnings From       |        | 
|Continuing Operations         |        |  |                        |       |                             |   | 38,783       |   |       | 8,271 
|                              |        |  |                        |        |                             |   |              |   |       |       
|Loss on derivative            |        | 
|financial instruments         |        |  |                        | 1      |                             |   |             |   |       |      
|Interest income               |        |  |                        | (2,449 | )                           |   | 166          |   |       | (315  
|Interest expense              |        |  |                        | 6,841  |                             |   | (157         | ) |       | 1,222 
|Other expense (income)        |        |  |                        |       |                             |   | 479          |   |       | (479  
|                             
|Other Expense, Net            |        |  |                        | 4,393  |                             |   | 488          |   |       | 428   
|                              |        |  |                        |        |                             |   |              |   |       |       
|Income (Loss) From Continuing |        | 
|Operations Before Taxes       |        |  |                        | (4,393 | )                           |   | 38,295       |   |       | 7,843 
|Income Tax Expense (Benefit)  |        |  |                        | (1,838 | )                           |   | 9,307        |   |       | 2,992 
|                             
|Income (Loss) From Continuing |        | 
|Operations                    |        |  |                        | (2,555 | )                           |   | 28,988       |   |       | 4,851 
|                              |        |  |                        |        |                             |   |              |   |       |       
|Loss From Discontinued        |        | 
|Operations, Net of Tax        |        |  |                        |       |                             |   | (24,624      | ) |       | (415  
|Cumulative Effect of a Change |        | 
|in Accounting Principle,      |        | 
|Net of Tax                    |        |  |                        |       |                             |   | (7,574       | ) |       |      
|Equity in Net Income of       |        | 
|Consolidated Subsidiaries     |        |  |                        | 1,226  |                             |   |             |   |       |      
|                             
|Net Income (Loss)             |        |  | $                      | (1,329 | )                           | $ | (3,210       | ) | $     | 4,436 
|                             

-79-

---

Condensed Consolidating Statement of Cash
Flows for the fiscal year ended October 25, 2002

In Thousands

|                                                   | Parent |  | Guarantor
Subsidiaries |        | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |       
|-------------------------------------------------- | ------ |  | ---------------------- | ------ | --------------------------- | - | ------------ | - | ----- | ------
|Cash Flows Provided (Used) by Operating Activities |        |  |                        |        |                             |   |              |   |       |       
|Net earnings (loss)                                |        |  | $                      | (1,329 | )                           | $ | (3,210       | ) | $     | 4,436 
|Depreciation & amortization                        |        |  |                        |       |                             |   | 15,152       |   |       | 2,411 
|Deferred income tax (benefit)                      |        |  |                        | 461    |                             |   | (1,190       | ) |       | 7     
|Loss on disposal and holding                       |        | 
|period loss on discontinued                        |        | 
|operations                                         |        |  |                        |       |                             |   | 22,718       |   |       |      
|Working capital changes, net of                    |        | 
|effect of acquisitions                             |        | 
|Accounts receivable                                |        |  |                        | 639    |                             |   | 3,057        |   |       | 1,848 
|Inventories                                        |        |  |                        |       |                             |   | (105         | ) |       | 3,041 
|Prepaid expenses                                   |        |  |                        | 66     |                             |   | (1,683       | ) |       | 1,160 
|Accounts payable                                   |        |  |                        | (412   | )                           |   | 4,020        |   |       | 1,441 
|Accrued liabilities                                |        |  |                        | 1,714  |                             |   | (350         | ) |       | 550   
|Federal & foreign income taxes                     |        |  |                        | (1,662 | )                           |   | (7,514       | ) |       | (1,021
|Other, net                                         |        |  |                        | 314    |                             |   | 16,279       |   |       | (6,656
|                                                  
|                                                   |        |  |                        | (209   | )                           |   | 47,174       |   |       | 7,217 
|                                                   |        |  |                        |        |                             |   |              |   |       |       
|Cash Flows Provided (Used) by Investing Activities |        | 
|Purchases of capital assets                        |        |  |                        | (209   | )                           |   | (11,186      | ) |       | (4,314
|Escrow deposit                                     |        |  |                        | (3,500 | )                           |   |             |   |       |      
|Capital dispositions                               |        |  |                        | 24     |                             |   | 140          |   |       | 395   
|Acquisitions of businesses, net                    |        |  |                        |       |                             |   | (118,995     | ) |       | (5,654
|                                                  
|                                                   |        |  |                        | (3,685 | )                           |   | (130,041     | ) |       | (9,573

-80-

---

Condensed Consolidating Statement of
Cash Flows for the fiscal year ended October 25, 2002

In Thousands

|                                                   | Parent |  | Guarantor
Subsidiaries |          | Non-
Guarantor
Subsidiaries |   | Eliminations |   | Total |       
|-------------------------------------------------- | ------ |  | ---------------------- | -------- | --------------------------- | - | ------------ | - | ----- | ------
|Cash Flows Provided (Used) by Financing Activities |        |  |                        |          |                             |   |              |   |       |       
|Net change in credit facilities                    |        |  |                        |         |                             |   |             |   |       | (1,960
|Repayment of long-term debt                        |        |  |                        | (5,714   | )                           |   | (75          | ) |       | (557  
|Investment in subsidiaries                         |        |  |                        | (91,314  | )                           |   | 83,292       |   |       | 6,796 
|                                                  
|                                                   |        |  |                        | (97,028  | )                           |   | 83,217       |   |       | 4,279 
|                                                   |        |  |                        |          |                             |   |              |   |       |       
|Effect of foreign exchange                         |        | 
|rates on cash                                      |        |  |                        | (68      | )                           |   | 75           |   |       | 1,213 
|                                                  
|                                                   |        |  |                        |          |                             |   |              |   |       |       
|Net increase (decrease) in cash                    |        | 
|and cash equivalents                               |        |  |                        | (100,990 | )                           |   | 425          |   |       | 3,136 
|Cash and cash equivalents                          |        | 
| beginning of year                                |        |  |                        | 107,592  |                             |   | 1,060        |   |       | 11,288
|                                                  
|Cash and cash equivalents                          |        | 
| end of year                                      |        |  | $                      | 6,602    |                             | $ | 1,485        |   | $     | 14,424
|                                                  

-81-

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Report of Independent
Registered Public Accounting Firm

To the Shareholders and
the Board of DirectorsEsterline Technologies CorporationBellevue, Washington

We have audited the accompanying
consolidated balance sheets of Esterline Technologies Corporation as of October 29,
2004 and October 31, 2003, and the related consolidated statements of operations,
shareholders equity and comprehensive income, and cash flows for each of the three
years in the period ended October 29, 2004. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial
statements referred to above present fairly, in all material respects, the consolidated
financial position of Esterline Technologies Corporation at October 29, 2004 and
October 31, 2003, and the consolidated results of its operations and its cash flows
for each of the three years in the period ended October 29, 2004, in conformity with
U.S. generally accepted accounting principles.

As discussed in Note 2 to the
consolidated financial statements, effective October 27, 2001 the Company changed its
method of accounting for goodwill in accordance with Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets.

Ernst & Young LLP

Seattle, WashingtonDecember 10, 2004

-82-

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